We are joined again today by Katie McMillan, Director of Sales at MPI, the merchant processing partner of First United. Today we're talking about reviewing your merchant services statement. Why do merchant providers always ask for all your statements? What are they looking for and what can you find in those statements that can help ensure you're getting the best price with your merchant setup.
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Eric: Hello, and welcome to "What Matters Most," the podcast all about finances, community, savings, and security for you, your family, and your business. This podcast is brought to you by the hopeful folks at My Bank, First United Bank & Trust. I'm your host, Eric Nutter, and in today's episode, "What Matters Most" is the importance of reading your financial statements. And for this helpful discussion, I am thankful to be once again, joined by Katie McMillan, director of sales at MPI, the merchant processing partner for First United. Hey, Katie, how's it going?
Katie: It's going well. Thank you again, as always for having me.
Eric: Yeah. No, you have now exceeded all other guests. You are five-time repeat guest. I mean, at this point, you may as well just be co-host on the show with me. So, I appreciate you joining me once again today. And today's episode, we're talking a little bit about the importance of reading your statements and, in particular, as we would with you, we're talking about merchant services statements. So, as we have with all of our other episodes, let's start with the baseline. What is a merchant services statement?
Katie: Yes. And I'm imagining that anyone listening to this podcast right now, you know, did a collective of merchant services, right?
Eric: Maybe. They don't get quite as excited as we do about this. I don't understand.
Katie: Well, maybe that, and I think like with any industry, there have been some folks that have been out there that maybe didn't create a great name for, you know, this service, in particular. I think you had some folks that were feet on the street that came through areas and promised savings [inaudible 00:02:00] pricing, and it wasn't the fact when the first statement arrived and, you know, business owners are busy.
And the last thing that they have time for is to go back and triple-check the people that are providing them basic business services if they're doing what they said that they were supposed to. But I think probably part of it is the topic, but also that, you know, some folks have not had a great experience with merchant providers and I completely understand that.
But, you know, it's similar to a phone service or internet service provider. It's a service that generates a statement. And you should be getting a statement once a month. You can get it electronically or by mail, whoever your provider is. You can set it up to be either way. We personally will have folks receive their statement via mail, but they also have the ability to log in online to access the statement at any time.
And that statement is going to be going through the activity for the cards that you processed for the month prior. So, this is going to give you an idea of how many cards you processed, what types of cards you processed, or you know, did you process 60% of Visa, 70% Amex, you know, whatever your percentages are for the month for all of the major card brands.
And then there should be a part of the statement that tells you what each of your daily deposits were for the month. So, as you're going through, your accountant is going through and reconciling your operating account, you should be able to have your merchant services statement next to that bank statement and go, "Yep, got that deposit, got that deposit, got that deposit." And then the statement should also be outlining the charges that you incurred as a result of accepting those cards.
Eric: Because different cards charge different amounts.
Katie: They do. They absolutely do. The type of card that you're accepting, the way that you're accepting that card all impact how you could be potentially charged for that card depending what pricing program you're on.
Eric: So, you know, and I think that reviewing the statements is with anything...I mean, this doesn't apply just to businesses. It's in life as well. You know, you may have signed an agreement for your cell phone and, you know, the pricing ends after two or three years or something and you've forgotten.
And so, if you're not looking, suddenly your bill is higher or there's extra charges that you're not paying attention to because you're just not taking the time to read those things. So, I think it's important just advice just, in general, is especially when it comes to your wallet and the dollars that are going out of it, you need to keep an eye on things, right?
Katie: Absolutely. Absolutely. Merchant services has become, you know, a necessary evil in some people's minds. And the benefits to accepting cards, in my opinion, far outweigh the fact that there's a cost associated with it, as long as the cost associated with it is reasonable. When you go from doing just cash and check acceptance to allowing debit or credit cards to be accepted at your business, it expands your clientele base, you know, 40% to 60%.
And it also encourages folks to spend more money. You know, if you only have $20 in cash in your pocket and the widget that you want is $45, if you only have a $20-bill, you're not going to buy that widget. But if that place of business accepts credit cards, then you might have a $8,000-limit on the card.
So, the difference in spending the $45 versus the $20 that's in your pocket is not an issue in the consumer's mind because they're going to be paying that $45 back either the following month or over the course of six months. You know what I mean?
They don't think about the fact that they're spending the cash in the moment. So, as long as you're accepting payments with reasonable pricing attached to it with a good provider, it's an excellent way to collect payment for your business. And really, especially post-COVID, having the ability to accept contactless payments has become really important.
Eric: So, Katie, why do companies ask to see these statements? Like, what is the content of the statement that is beneficial for them? Like, what value can they get out of that?
Katie: So, for the merchant, right, they're going to be able to look at the statement and go, "Okay, do my deposits match, and are my fees for the service in line with my expectations?" When you have another provider that requests the statements to review, say, you've asked for an analysis or say, you know, you have a provider who calls you.
Anybody who's opened a business in the last five years knows the first week of that new business number is inundated with merchant services providers asking for your business, or, you know, if you open a new location, they want to see statements from your other location. The reason why folks like MPI want to see those statements when we try to get your service is there's a few different reasons.
One, we want to see what kind of pricing program you're on because if we offer you service, we're going to try to match the pricing program that you're on with potentially what we want to offer you so that it's not a huge change. There's three really big...the most popular pricing programs have very different statements. And so, when you switch service, we kind of want to allow you to still be able to read your statements the way that you did before.
Seeing your statements allows us to understand how you're processing and be the experts in the conversation. You know, does your current provider have you on the right classification code? Could you be paying cheaper rates inherently by classifying you as a certain business type?
It allows us to understand your processing to the level of, would you benefit from a flat rate that would make your overall cost of everything go down and you go from a really complicated model to a simplified model, kind of similar to square? It lets us do an apples-to-apples comparison of your current provider service and fees and our service and our fees so that you can have a good, solid estimate of what we could potentially save you by switching your service to us.
Eric: That's awesome. Okay. So, those statements give you as a merchant provider and companies like MPI out there the ability to kind of see all of that detail and understand it. And you guys look at it all the time. So you understand the nature of the beast, so to speak.
So, you can look at all of the details that are included in those, and ideally, I think oftentimes when businesses are asked for those statements, they're asked for more than one. They want to see it over a course of several months or longer, right. So, beyond you being able to see and get information out of that, when a merchant looks at it, when they're looking at their own statement, what are they looking for? How can they analyze those to gain value?
Katie: Absolutely. So, they should be looking at those statements to check the pricing to make sure that it matches what the person who sold them that service committed to. So, one of the first things that merchants should be doing is they should be checking their effective rate. And the effective rate is not always going to be published on that statement, but it's very easy to get.
That's the new cake, the total amount of fees all-in that they charged you for the month, and you divide that by the amount of credit card you processed. Say, your bill was $200 and you processed $20,000 in a month, you're going to take the $200 and divide it by the $20,000, and then that gives you your effective rate. If you are a merchant who's doing 90% of their transactions in-person, right, where the customer's coming into a store and paying for it and using their card and dipping it into that machine, your effective rate should be well below 3% all-in on your fees.
If you are doing the majority of your business and you don't have the card present, say, you're doing a lot of orders over the phone, or, say, you're doing a lot of online business, your effective rate could be a little closer to 3% but it should never be over all-in 3.5%. And these are little indicators, right?
So, every month, you know, your volume is going to fluctuate potentially. You might do 20 grand this month, you might do 25 grand the next month. If you're a super seasonal business, four months out of the year, you might do $100,000 a month and the rest of the year you do $30,000. Your effective rate should generally stay the same unless you have, you know, one huge card that came through that was, like, a government purchase or something like that.
Your effective rate should generally stay the same. You start to see your effective rate either going above those two numbers I just gave or you start to see it slowly going up, that's kind of the first red flag to go, "Let me take a look at this because this seems to be changing." You want to specifically look at whatever the provider promised you is going to be your rate, okay?
And that depends on your pricing plan. If you have just one rate, if you have three rates, or if they have you on something called interchange plus, where it passes through all those costs from Visa, MasterCard, Discover, and American Express and there's a six markup there, then always check that your fixed markup, and it should be anywhere from 0.20% up to, I'd say, 0.75%. That's a pretty good range of what you're going to find out there 99% of the time.
If your fixed markup has been 0.20% and all of a sudden you get a statement and it's 0.35%, that rate has changed. And you want to call your service provider and say, "Hey, did something change? Can you explain to me my statement? This looked this way before." I can't impress upon merchants enough how important it is for you to question if something changes on your statement.
If your monthly fee was $5 and it changed to $10, you as a business owner might be okay with that change, but you should be given notice about the change and you shouldn't feel uncomfortable asking your provider to explain that change to you. Your provider should be making sure that you get at least a physical copy if not access to an online statement every month. And should be more than happy to talk to you about the rates and fees on there and do the math with you.
When we sign new clients, a lot of times, you know, I train our sales team that in the first 30 days, they're required to do a check-in, "Hey, how's your service? Is everything going okay? Would you like me to go over your first statement with you so that you know how to read it?" We really like to educate our clients so that when they get their statements, they always see your monthly fee is the same, your PCIC has kicked in this month and you know that it's supposed to be this.
We never want a phone call from a merchant where they're, like, "I don't either know how to read my statement or my fees went up and I don't understand why." And so, I think merchants sometimes get intimidated by statements and feel like they can't ask those questions.
Eric: Right. No, that's good advice. And as I mentioned earlier, I think a lot of people could benefit from that confidence of knowing you should ask and you're allowed to ask so that you can get that clarity and hopefully, your providers are taking the time to share with you the information so that you can understand it upfront. But if you don't know, ask, and that can help you avoid a lot of challenges down the road or overcharges that maybe you weren't ready for or unaware of.
Katie: Sure. And we really like to create relationships with our clients so that our clients are calling the person that sold them the service. You know, we have a fantastic customer service team, but our company culture is very much, you know, the relationship manager that we have that sells the service to you, you know, that you remember them by name, "I have to call John, I have to call Drake because this is the pricing I was quoted and this looks different." And so, that you don't just go, "I'm calling a 1-800 number. I'm calling a person that I can hold accountable," and so that we can work through and help you understand that statement.
Eric: Exactly. Katie, this has been really helpful, and I hope that people out there are taking advantage of this information and taking it to heart and going back and looking at their statements. Do you have any final thoughts to share with our listeners before we wrap up?
Katie: Yeah, absolutely. Whether you've signed up for service with someone in the last six months or whether it was 10 years ago, you know, we have customers that have been with us for over 10 years and they check in often just to make sure everything's good, you know, check in on your pricing, ask questions.
If somebody offers you an analysis, take them up on it. It doesn't hurt to have somebody take a look at your current pricing to see if you have good reasonable pricing and beware if you have someone promising a lot of savings, ask them to do the math in front of you so you can be sure you're getting quoted accurate information.
Eric: Great advice. Katie McMillan, director of sales at MPI, the merchant processing partner for First United. Thank you so much for joining me today and providing such helpful insights. If any of our listeners have a question or want to learn more, what's the best way they can get the support they need?
Katie: They can reach out to any of their local branches and they will put them in contact with one of our First United relationship managers that help manage our partnership.
Eric: Excellent. And you can find all of that at mybank.com to find your local branch or your advisor. That brings us to the end of our show. You can always find more episodes by visiting mybank.com/podcast or on your favorite podcast app. You can also leave feedback, ask questions, or request a topic for us to discuss by sending an email to [email protected] Thank you for listening. We'll be back next week with more helpful content. But until then, we wish you the best in focusing on what matters most to you.
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