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Your Merchant Credit-Card Statement

July 1, 2005

7 Min Read
Your Merchant Credit-Card Statement

How many times have you said, I give up. I dont understand these charges on my credit-card service statement. If youre like the typical business owner, more times than you care to remember. In fact, many merchants have stopped trying to understand what theyre really being charged. Dont give up! Theres a wealth of information in your statement if you know how to interpret it. It can give you insight to fraud, compliance, cost and performance. You can also figure out if youre being charged according to the conditions of your contract or if additional fees are being applied.

Your credit-card statement can be received by mail or electronically. Depending on the size of the account, it can be sent to you daily, weekly or monthly. Though every service providers report will look different, it will include five key areas you should monitor:

  1. Plan summary

  2. Transaction activity

  3. Downgrades

  4. Fees

  5. Net settlement

The Plan Summary

On the first page of your statement, youll find your business name and billing address, the name and contact information of your merchant-service provider, your merchant ID number (MID), and the dates of business activity the statement is reporting. Next is the Plan Summary, presented as columns arranged from left to right. The summary will usually include the credit-card type, transaction count, total dollars billed, credit item count, credit amount, and a few other key figures. (There is no typical orderit varies from provider to provider.)

Card type refers to MasterCard, Visa, American Express, Discover, JCB or others. Those listed on your statement reflect the types you accepted during the given period. If you see a card listed that you dont accept at your facility, or you dont see a card type you know you accepted from a customer, contact your service provider immediately.

Transaction count refers to the number of items you billed for each card type. If a number looks off, again, contact your service providerfor example, your statement says you processed 1,000 Visa transactions, but you believe it to be closer to 100. The discrepancy could be due to any number of reasons, including system error, a mismatch between the calendar month and reporting cycle, unusual patterns of activity, or fraud.

Total dollars billed represents the total amount billed on each card type. Credit item count represents the number of items for which credit was awarded. Credit amount represents the amount of credit issued on each card type. You need to pay very close attention to the credit item count and amount, as these numbers can be a tip off to potential fraud. You should have a sound grasp of what your typical monthly item and dollar amounts are for the sake of comparison.

Transaction Activity

Following the plan summary, there will generally be a section that outlines transaction activity. In most cases, it is based on daily activity, but it might vary depending on how often you batch your transactions. For example, some companies process multiple batch settlements in a single day, while others combine batches over weekends or holidays. This can lead to a lot of confusion when you attempt to reconcile your credit-card statement against a bank statement. To add to the confusion, the credit-card statement cycle might not adhere to a calendar month or to the same cycle as your bank.


When it comes to credit-card statements, the area of greatest misunderstanding is the downgrade or additional charges area. Ironically, its also the area that provides the most information regarding system policy, practice and procedure, and potential sources of fraud.

Technically, a downgrade is a nonqualified transaction. Downgrades or additional charges are applied to any transaction that lacks any of the requirements necessary to obtain the best, or qualified, rate. These qualifications are outlined in your contract with the service provider. For the typical self-storage operator, the contract is executed as a retail relationship. This means the best processing rate is given only under very specific circumstances:

  • The card must be present.

  • The card must be electronically swiped.

  • The card must be a consumer card.

  • The presenter of the card must be the authorized cardholder.

  • The transaction must be settled (batched) within a 24- to 48-hour period of the authorization.

If the self-storage operator uses the same MID for retail and recurrent billing practices and the account is based on a retail relationship, every transaction generated from the recurrent-billing function will be downgraded. The operator will pay a significant surchargewhich might be equal to or greater than the stated best rateon each transaction. This puts him out of compliance with his contract, reduces his protection from charge-backs and reversals, and opens him up to fines from the credit associations.

Some of the primary reasons for downgrades include:

  • Accepting the wrong type of credit card, i.e., business vs. consumer

  • Using the wrong operation platform, i.e., retail, Internet or MOTO (mail order/telephone order)

  • Failure to adhere to policy, procedure or practice, i.e., swiping vs. keying card numbers

As a merchant, you cant control the type of card your customer presents. However, by paying attention to the types of cards your customers use before you negotiate the contract with your service provider, you can make sure youre covered for the cards you most frequently accept.

Its important to understand which operating platform is best for you as well. For example, if the majority your transactions are recurrent, it would be best to opt for a MOTO platform into your contract. Or you can choose to have multiple MIDs, which will allow you to use more than one platform type.

Finally, pay careful attention to the three Ps (policy, practice and procedure), or you could face steep charges. For example, if your contract stipulates that you should batch your transactions within a certain time frame, you must do so, or you will be considered late, and your transactions will be downgraded. The solution is to implement an auto-batch function or enforce strict policies at your facility that dictate when batching should be done.

While downgrades sound like a nightmare, monitoring them can give you insight to potential fraud activity. This is a complex issue and should be addressed by a competent expert; however, you can keep an eye out for red flags by tracking the type and percentage of downgrades on your statement. Changes in an established pattern may suggest fraud and should be carefully investigated.


The next part of your statement will address additional fees. There are more than 60 fee categories that can be applied to an individual statement. Examples include monthly statement fees, penny costs for authorization, settlement and batch fees, equipment fees, wireless fees, charge-back fees, extended guaranty fees and many others. Its important you understand what each fee represents, how and why it is being applied, and if the fees you are being charged are consistent with the conditions of your contract and industry standards. Again, these charges can be substantial, possibly even equal to or greater than the stated best rate.

The Net Settlement

Your net settlement is the amount of money you actually receive after all charges are removed. This figure allows you to calculate your actual effective rate, which is critical, because it tells you what youre really paying to provide credit-card service to your customers.

To calculate your effective rate, divide the total dollars billed by the total dollars received in your account. Some would argue the effective rate should be calculated by dividing the net dollars billed by the total dollars received. This modification takes into account reversed transactions. The important point is you are using this calculation as a comparisonto your expected charges and other offers of merchant service.

Finally, at the end of your statement, there is normally a summary box that lists total charges deducted from gross sales, yielding the net deposit to your account. By monitoring the five key areas of your credit-card statement, youll give yourself a much better chance of obtaining and maintaining a fair and equitable relationship with your service provider, and reduce the odds of fraud and compliance violations.

Ross Federgreen is a co-founder of CSRSI, which provides an integrated approach to the analysis, design, implementation, deployment and management of electronic transaction services and systems. Since 1999, the company has helped more than 350 public and private institutions reduce the cost of acquiring money and minimize the liability exposure related to payment transactions and customer data. For more information, call 866.462.7774, ext. 1; e-mail [email protected]; visit www.csrsi.com.

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