Is your effective rate too high? A five minute self-check

The rate your processor quoted you and the rate you actually pay are often different. Your effective rate is the real one. It's all of your credit card processing fees added together, divided by how much you ran through cards. Here is how to find yours.

Grab last month's merchant statement. You'll need two numbers from it:

• Total fees: every fee you were charged, including processing, monthly, statement, compliance and equipment fees. Some statements show a "total fees charged" line. If yours doesn't, add them up.
• Total card volume: the total amount your customers paid by card that month.

Effective rate = total fees ÷ total card volume × 100

Example: if you paid $1,200 in fees on $40,000 in card sales, you did $1,200 ÷ $40,000 = 0.03, which is a 3.0% effective rate.

That's an illustrative example only. Your number will be different.

• Compare it to the last two or three months. If it's creeping up, ask why.
• Compare it to what you thought you were paying. If it's higher than the rate on your quote, there are fees on top of it.
• Remember that the mix of cards matters. Premium and online cards generally cost more than a plain debit card swiped in person, so a business with lots of online sales will naturally run higher.

If you'd like a second set of eyes, I'll do the math for you and show you where you stand.

Scan your statement for any of these. Not every one is a problem, but each is worth asking about:

• Monthly minimum fee. You pay it if your fees fall below a set amount.
• Statement fee. A charge just for sending you the statement.
• PCI or compliance fee. Some are fair. Others are padded, or charged as a "non-compliance" penalty.
• Annual fee. A yearly charge that may not have been clearly explained.
• Batch fee. A charge each time you close out your sales for the day.
• Gateway fee. A monthly or per transaction charge for your online or software connection.
• Tiered pricing. Categories like "qualified," "mid-qualified" and "non-qualified" make it hard to see your real cost.
• Markup on card network fees. Network fees (interchange and assessments) pass through at cost on many plans. Make sure yours isn't inflated.
• Equipment lease. Look for a long, hard-to-cancel lease on a terminal that you could buy outright, or get at no cost.
• Early termination fee or auto-renewal. Check your agreement for what it takes to leave.
• Fees you can't identify. If nobody can explain a line, ask.

If you check three or more, it's worth a closer look. For a longer list, see 11 Hidden Credit Card Fees Fairfield County Businesses Pay. To learn how to read the rest of your statement, see How to Read Your Merchant Statement.

You have three options:

1. Ask your current processor to lower it. Sometimes that works, especially with a competing quote in hand.
2. Fix the fees that shouldn't be there. Cancel the extras you don't need.
3. Get quotes. I ask several processing partners to quote on your actual statement, so you see your options side by side. If you use booking or point of sale software, you may be able to keep it and change only the gateway. See Keep Your Software.

Send me one recent statement and I'll do all of this for you, with a side-by-side comparison. It's free, and if I can't find savings, I'll send you a $50 gift card for your time.

Prefer email? Send your statement to mark@seamlessmerchantservice.com. Prefer to talk? Call or text (860) 371-1795.

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Seamless Merchant Service is an independent, no-cost processing broker. I compare quotes from several processing partners and I'm paid by the partner you choose, and only if you choose one. Results vary by business.