There are lots of different ways that a merchant account statement can be presented. The best way, which is most transparent to the merchant, is interchange plus and the most common way is 3-Tier . The bill below is somewhere in-between. It also allows me the opportunity to demonstrate some of the dirtiest tricks played by merchant account providers.
1. V is a regular Visa credit card, VB is Visa Business, VD is Visa Debit.
2. This shows the danger of focusing on 1 rate when negotiating (and the benefits of Interchange-Plus where there is 1 clear rate to negotiate) multi-tier processing agreements like this one. The merchant got a 1.77% rate which sounds great, but there are lots of fees that make this deal pretty expensive for the merchant.
3. This is a demonstration of the trick Debit Markup – 1.77% is a great rate, below cost for regular Visa credit cards. This merchant is an only-online business meaning that their usual interchange category for Visa transactions is the one Visa calls E-Commerce Basic, which costs 1.85% + 0.10 for non-rewards cards and 1.90% + 0.10 for Visa Signature cards which means that this Merchant Account Provider is taking a loss on those transactions (Mastercard e-commerce rates are a little bit lower and they are making a slight profit on those).
However, for Visa Debit this merchant is getting charged the same 1.77% + 0.10 even though the interchange rate falls to 1.60% + 0.15.
4. This is a good example of Marking Up The Downgrades. Look at the line that says Visa EIRF $329.25. First, it is really hard to figure out what that fee is for, what does EIRF mean? What extra rate is being applied to those transactions? There is no way to tell from the bill, but here is my guess:
75 transactions at an extra $0.10 is $7.50
$329.25 – $7.50 = $321.75
$321.75 / $16,168.23 = 1.99%
It looks like the merchant is getting charged an extra $0.10 + 1.99% for all these EIRF transactions on TOP of the 0.10 + 1.77% they are already being charged for those transactions. An EIRF transaction is one where the merchant used their virtual terminal to enter the customers’ credit card information, rather than having the customer proceed through the checkout process on their website (the critical difference being that the 3-digit security code on the back of the card was not used).
This is a pretty sneaky practice particularly because the 1.99% never shows up on the bill anywhere. When you add up all the categories in the red box this practice adds over $800 to the bill.
5. Divide the total charges (1,002.01 in fees + 2,299.73 in discounts) = $3,301.74 into the total sales $120,680.95 and you get 2.74%, almost a full 1.00% higher than the 1.77% that this merchant thought he was paying.