Jul
23
2010
Billing statements can be confusing, especially documents for credit card processing charges. It’s important to understand what charges are for, and how to keep an eye on key elements of the statement when reviewing credit card processing charges.
Understanding your Credit Card Bill
Each payment processor arranges statements differently, but there are key elements to each statement.
Total Amount Submitted: This income portion of the statement outlines all transactions submitted for processing. It’s important that accounting sales totals match this section.
Third Party Transactions: If you accept Discover Card, Diners Club, American Express, or electronic check, the statement includes this section. These credit cards are highlighted separately, as transactions made with these cards may be subject to different fees.
Adjustments: One of the most confusing sections of the statement, it uses the words deposit and refund in unexpected ways. This section is for merchants with a cash reserve payment account. In this account, the internet payment processor holds some of the merchant’s money (typically $500 - $5000). When a customer payment is processed, the merchant’s payment processor (bank) requests those funds from the customer’s (issuing) bank.
In addition, the merchant’s payment processor will subtract an amount equal to the transaction from the merchant’s cash reserve account, often referred to as a “deposit”. After a few days, the credit card clears and the issuing bank “refunds” the amount back to the holding account. Just be sure deposits and refunds balance out each month.
Interchange Fees: This fee represents the payment processor’s cost for processing a credit card transaction, and is set by credit card associations. Fees vary and are based on risk.
Service Charges: These fees include per transaction fees and discount rates calculated as a flat rate or percentage. They vary greatly among payment processors, and should not be more than five percent of your total sales.
Charge backs and Reversals: When a customer is unhappy, they can contact the credit card company (the issuing bank),and get a refund. Regardless of who is at fault, you will be charged a fee that must be subtracted from revenue. You can challenge a charge back, and the payment processor will show any reversal in this section.
