Why is it So Hard to Read a Merchant Statement-converted

1. Why is it So Hard to Read a Merchant Statement? Because some processors prefer you remain in the dark when it comes to their fees. It’s getting more difficult to decipher a merchant statement and that’s not by accident. You see, some providers purposely convolute their statements so they can their hide fees.

2. The merchant services industry is a very competitive one. It’s also viewed by many as a commodity. So, most merchants service providers feel they are left to compete only on price. And the truth is, there’s only one place they can compete on price, and if they make it too easy to compare, it will be harder to be competitive. So, how do you charge higher prices in an extremely competitive commodity industry? By fooling your customers with confusing statements so they can’t compare it with competitors. There are four primary methods providers use to calculate your fees. But, no matter which method is used, it always comes down to the same basic formula: Total Cost = Base Cost + Markup The total cost you pay equals a Base Cost plus a Markup. It’s very simple. What makes it even simpler is that the Base Cost—also called interchange, dues, fees, and assessments—doesn’t vary for each processor –it is the same for all. It’s established by the card issuing banks and is the same for any merchant provider you choose. In other words, the only way a provider can make money is to charge you a bigger Markup. It’s the only part of Total Cost that’s negotiable. Of course, the trick to charging a bigger Markup is hiding it. When it comes to hiding the Markup fee, providers use two basic strategies: graphical and pricing methodology. The graphical approach to hiding Markup fees requires the merchant to produce a visually confusing statement. One that is very difficult to understand with a poor layout and overuse of industry jargon and abbreviations. The layout and structure of merchant statements vary widely among service providers. If the one you’re looking at is confusing, you have to ask yourself “what are they hiding?” The other approach to hiding fees is a pricing methodology called tiered pricing or bundled pricing. The only way to know if you have a competitive Markup rate is to separate it out from the Total Cost. Tiered or bundled pricing makes it so you can’t do that. One way to confuse you with tiered pricing is to quote you Total Cost and nothing else. You have no way of knowing what part of that is the Base Cost and what part is the Markup. And if you don’t know the Markup, you can’t compare it. Another way to confuse you with tiered pricing is to quote you a price and not be clear whether it’s Total Cost or Markup. It has the same effect as before: you can’t compare prices. What makes tiered pricing even more opaque is that it enables merchants to bundle the fees into different rate tiers of their choice which depend on the qualifying nature of the transaction. So, there’s usually no way to even compare tiers among merchant providers because they all set qualifying points differently.

3. With tiered pricing, merchants can also increase your processing cost without increasing rates simply by assigning a transaction to a less qualified (and more expensive) tier. Another drawback to tiered pricing is that it allows the merchant provider to keep refund credits. When a business refunds a customer, the business is supposed to receive a credit for a portion of the interchange fees paid on the original transaction. But with tiered pricing, since it’s bundled, the merchant keeps it and the business gets nothing. Generally speaking, the pricing methodology called interchange plus pricing is the most desirable because it’s the most transparent. The merchant charges a fixed percentage over the Base Cost. Since it’s broken out separately, it’s easy to compare. And since it’s easy to compare, it usually results in lower charges for the business. Ultimately, which pricing method you choose isn’t important. What is important is price transparency. You must be able to easily identify the Markup you’re paying. It’s the only way to compare it. It’s the only way to negotiate it. It’s the only way to get a better deal. When you’re ready for totally transparent merchant pricing and the best customer service in the industry, head on over to AppStar Financial. You’ll always know where you stand.