Merchants frustrated by the complexities of their monthly credit card transaction statements should 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,” Bob Baldwin, president and chief financial officer of Princeton, N.J.-based Heartland Payment Systems Inc., tells ISO&Agent Weekly. “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 trade associations have been pushing for a simplified monthly statement that does not overwhelm them with hundreds of pages of credit card transactions carrying an array of interchange rates and fees.
One reason for the complexity of merchants’ statements is the diversity of interchange pricing schemes among card brands, Baldwin notes. But certain acquirers may be taking advantage of that complexity to squeeze out more profit on a transaction at the merchant’s expense, Baldwin suggests.
“A merchant in this economy would find it very worthwhile to have an analyst, or a team that is very analytical, looking over statements,” Baldwin says.
Moreover, many entrepreneurs lack the time, aptitude or inclination to pore over complex statements and spreadsheets, he suggests.
A return to a pricing approach common in the 1990s that bundled interchange rates for qualified, mid-qualified and non-qualified payments could simplify the statements, Baldwin says.
“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,” Baldwin says.
John Mayleben, Michigan Retailers Association senior vice president for technology and product development, agrees that too many categories open the door for errors and overcharging.
Mayleben uses the analogy of four buckets representing transaction types–check, qualified, mid-qualified and non-qualified, 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 mid-qualified 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 non-qualified bucket at a higher rate?”
In the end, that retailer could end up overpaying for a transaction, Mayleben suggests.
More complexity arises when the processor charges a percentage fee and transaction fee but does not assess them on the same statement, he says.
Some merchants can see the transaction fee turn up the following month, which makes it difficult to track expenses, Mayleben says.
A statement showing interchange rates plus acquirer markup fees would fully disclose what the merchant is paying, 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,” Baldwin 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.”
The fee reductions associated with new Federal Reserve Board debit-pricing rules are significant enough to prompt more attention to monthly statements, he says.
“I don’t want it to sound like everyone in this business is a crook because they are not,” Baldwin says. “But there are others who take advantage of the complexity to fatten their bottom line with deceptive practices.”
