Credit Card Processing - Beware The "Bill Back Statement"

By T. L. Lindemood

When credit card processing companies use bill back statements, their discount rates and fees are broken up and charged over a period of a couple of months, rather than appearing clearly on one single monthly statement. To illustrate: statements for the month of April will contain basic fees and a portion of the discount charges for transactions run in March, but all of the downgraded charges won't show up until May's statements. (April's statement will have February's downgrades).

To confuse matters even further, the downgraded transactions are not linked to an exact sales volume. Instead, the statements simply show the number of transactions being downgraded and a downgrade fee. Think about it: If a business owner can't compare the downgrade charges against an exact dollar volume, how can he or she tell what discount rate is being charged? Further, if that merchant was already charged a partial discount rate on that same volume in the prior month, what is the likelihood that he or she would know (or remember) to add that amount to this downgrade charge? With this billing option, there is no easy way to determine how much is being charged for each type of transaction without doing a significant amount of legwork and research.

Recently, I conducted a rate review for a local business owner who was set up with this type of billing statement. After going back through several months of transactions, it became evident that she was being charged as much as 4% on certain transactions and was averaging around 3% on all transactions. She had no idea she was paying that much because her sales agent had quoted a very low rate (that applied only to her "swiped" debit card transactions). Of course, she thought that rate applied to all of her transactions and her statements made it difficult to tell exactly how much she was paying. Imagine her surprise when she learned she had been significantly overpaying throughout the duration of her current contract.

In my opinion, the only reason a processing company would use this billing technique is to keep their customers in the dark about how much they are charging. If your current provider is utilizing this type of billing structure, you might want to ask yourself what else are they hiding from you?