Merchants frustrated with the complexities of their monthly credit card transaction statements ought to consider having an analyst review them to avoid overcharges, a payments processor executive says.
"There are not a lot of standards in this industry for revealing all of the details on a statement," says Bob Baldwin, president and chief financial officer of Heartland Payment Systems Inc. in Princeton, N.J. "It's not as much like the Wild West as it used to be, but there are still people that will take advantage of you."
Merchants and their supporting organizations have been agitating for a simplified monthly statement that does not overwhelm a business owner with hundreds of pages of credit card transactions, many of which carry different interchange rates and fees for acquirers, processors and credit card companies. One reason merchant statements are so convoluted is that the interchange pricing schedules of the various card brands are so diverse, Baldwin says. Some acquirers may be exploiting the situation to squeeze out more profit from a transaction at the expense of the merchant, Baldwin says.
"A merchant in this economy would find it very worthwhile to have an analyst, or a team that is very analytical, looking over statements," he says.
Many entrepreneurs, Baldwin says, may lack the time or aptitude to pore over intricate statements and spreadsheets to spot excess charges.
He says a return to a pricing approach common in the 1990s, in which a couple interchange rates were bundled, could go a long way toward simplifying the statements.
"If it gets more complicated than that, the salesperson doesn't know where to slot the transaction, and the result is the merchant and the ISO are not on the same page about where it should be categorized."
John Mayleben, the Michigan Retailers Association's senior vice president for technology and product development, agrees that having too many transaction categories opens the door for errors and overcharging.
Businesses must determine each transaction's category, and as a result, some retailers may end up paying more than others for the same transaction, Mayleben says.
Mayleben uses the analogy of four buckets representing transaction types — check, qualified, midqualified and nonqualified, with retail prices of 1%, 2%, 3% and 4%, respectively — and the sales clerk having 400 pieces of paper, each one with a different interchange rate listed on it.
"Now, you have to decide which bucket to put each piece of paper in," Mayleben says. "One company owner might decide to put a card-not-present transaction in the midqualified bucket to create a profit because the interchange rate is less than 3%, but what happens if another company owner decides to put that same transaction in a nonqualified bucket at a higher rate?"
That retailer could end up overpaying for a transaction, Mayleben says.
Things get more bewildering when the processor charges a percentage fee and transaction fee but does not assess them on the same statement.
"Some merchants can see their 'transaction fee' portion of the monthly billing turn up the following month, which makes it difficult to track your expenses," Mayleben says.
A statement showing interchange rates plus acquirer markup fees would more fully disclose what the merchant is paying for, Baldwin says.
"Card brands have so many different interchange levels, so there are a lot of charges and a lot of things to look at, making it hard for the merchant to decipher," he says. "There can be markups on the interchange rate, but the acquirer may just call it interchange, and the merchant is paying more than he should, and would not know it."
The fee reductions associated with new Federal Reserve Board debit pricing rules are significant enough to prompt a new level of attention to monthly statements and potential hidden charges, Baldwin says. "I don't want it to sound like everyone in this business is a crook, because they are not. There are many honest ones," he says. "But there are others who take advantage of the complexity to fatten their bottom line with deceptive practices."
