The short answer
Every card fee on a merchant statement is three things: interchange to the card-issuing bank, a network fee to Visa or Mastercard, and your processor's markup. Add every fee and divide by total card sales to get your effective rate. Then look for tiered "nonqualified" charges and monthly PCI non-compliance fees.
What Are Interchange, Network Fees and Markup?
Every card fee on the statement splits three ways.
- Interchange goes to the cardholder's bank. Stripe notes the amount "varies based on the card type (credit vs. debit), how the payment was made (online vs. in person), and the industry," and the formulas "are published by the card networks."
- Network (assessment) fees go to the card brand, "tied to the transaction volume."
- Markup goes to your processor, "usually a percentage, a per-transaction fee, or a combination of the two." This is the only part a processor actually competes on.
How Do Interchange-Plus and Tiered Statements Look Different?
On interchange-plus, every transaction shows its real interchange and network cost with the processor's markup added on top, so the markup is visible.
On tiered pricing, transactions are bucketed into "qualified," "midqualified," and "nonqualified" tiers "based on criteria defined by the processor." Stripe calls it "the least transparent model," because "you don't control how your transactions are categorized." A statement where many sales land in nonqualified is the first thing to question.
Flat-rate statements, like Square's, show one all-in rate per sale.
How Do You Calculate Your Effective Rate?
Total every fee for the month, including monthly and per-batch charges, and divide by total card sales. That is your effective rate, and it is the only number that compares one processor with another.
Watch the ticket size. Because interchange includes "both a percentage and a fixed fee," a shop with small average sales pays a higher effective rate on the same pricing. Benchmarks are in average credit card processing fees.
What Is a PCI Non-Compliance Fee?
A monthly charge for skipping your security paperwork. Stripe defines it as a fee an acquiring bank or provider adds "when that business hasn't completed the PCI DSS validation its merchant agreement requires," and says banks "typically charge somewhere between $25 and $50 per month" until the business validates. Validating compliance removes it. Some providers charge none: Square advertises "no expensive audits, assessments, or noncompliance fees."
Which Line Items Should You Question?
Bring a recent statement to BatchOut and compare it line by line against a written quote.
- A high share of sales in mid-qualified or nonqualified tiers.
- A PCI non-compliance fee that never goes away.
- Monthly, statement, batch or "regulatory" fees you never agreed to.
- A markup that changed without notice.
Commonly Asked Questions
What is the biggest fee on a merchant statement?
Usually interchange, which goes to the cardholder's bank at rates the card networks publish. Your processor's markup sits on top.
What does nonqualified mean on a merchant statement?
On tiered pricing, the processor sorts each sale into qualified, mid-qualified or nonqualified tiers by its own criteria. Nonqualified is the most expensive tier.
What is a PCI non-compliance fee?
A monthly charge, typically $25 to $50 according to Stripe, that a bank or provider adds until the business completes the PCI DSS validation its merchant agreement requires.
How do I find my effective processing rate?
Add every processing fee on the month's statement and divide by total card sales.
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