How to Understand Your Merchant Services Statement

For more than two decades that I have been in the merchant services business. I have frequently been shocked by how many merchants hand me unopened merchant statements, for review. They often tell me that they are just too complicated to understand. Unfortunately, many merchant service providers do this by design so that merchants don’t know too much. Obviously, if you’re in any kind of business you need to accept plastic as a form of payment. Many merchants are simply resigned to the fact that it is going to cost them something and it is just accepted. What I want to try and do here is give you some things that will hopefully help you in your understanding of your own merchant statement.

Before I get started, let me just say, there are numerous types of statements that would encompass the numerous types of pricing models. There is Three Tier, Four Tier and Cost-Plus or Interchange-Plus pricing models, each with their own form of jargon. First let’s talk about some basics of the differences.


In this form of pricing model you would likely see these “bundled” type listings:

QUALIFIED: This would be one rate listed such as 1.85% + $.15. This “qualified” rate would include swiped debit cards and generic, no perk type credit cards

MID-QUALIFIED: Again, one rate listed such as 2.25% + $.15. These types of transactions would typically be hand-keyed, card-not-present or some form of Visa/MC “perk” card that pays the cardholder points or frequent flyer miles.

NON-QUALIFIED: Rates listed would be the highest of the three and would typically represent business cards, for example.

The problem with this form of pricing is it is at the processors discretion which category they place the various card/transaction types. So, consequently, you may be paying more that is necessary on some.


This form of pricing came along when debit cards became more prevalent in the marketplace. Better than Three Tier because it provides for a lower rate for debit cards.

TIER ONE: This level would be for swiped debit cards (not pinned debit cards) and would represent your lowest rate. Debit cards, of course, have less risk to you, the merchant, and therefore have a lower rate structure.

TIER TWO: This would be mostly equivalent to what is shown above for Qualified transactions

TIER THREE: Here again, this would be similar to Mid-Qualifed transactions in the Three-Tier model

TIER FOUR: Transactions that would mostly mirror the Non-Qualified transactions above.

Again, as with Three Tier pricing, the processor places card/transaction types if the categories that they best deem appropriate. This is not necessarily the “best” from a financial for the merchant.


This form of pricing is, by far, the most transparent and most desirable form of pricing. That is, as long as the processor utilizes a format on their statements that are easy to read and understand. As an overview, here’s how this pricing differs from the two previously discussed. Keep in mind that not all statements will look alike but these are the types of categories you would typically see:

DEPOSITS: This would be a daily listing of your batch totals for the day. It would give a reference number, total number of items, the dollar volume, number of items and the Net Deposit.

DEPOSITS ITEM SUMMARY: This section would be totals as far as your total number of transactions and the amount along with any credits.

CARD SUMMARY: On some statements, you may see this category which just breaks down how many different card types you received, i.e. Visa, MasterCard, Discover, Amex, Diners or Others. Really nothing here to be concerned with and is mostly offered for information.

SETTLEMENT/DISCOUNT: This is where we get into the section where you really need to be paying attention. It may be quite lengthy based on the specific card and transaction types that you see in your business. As mentioned earlier, this Cost-Plus/Interchange-Plus pricing is the most transparent pricing model. And, here is where you can determine what you are really paying. It can, at first glance, seem complicated and intimidating but it doesn’t need to be. So, here’s an example of what you might see and I have taken this from a recent merchant statement that I analyzed. The numbers you want to focus on here are the Amount, Discount Rate, Item Rate and Fee Amount. Here’s an example of 21 MasterCard transactions:

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