Cost examples and choosing a best-fit processor
How to calculate your effective rate from a Canadian merchant statement
A step-by-step method to find your real card processing cost from a monthly statement, split it into pass-through costs and markup, and spot fees that do not belong.
Your effective rate is the total of every processing-related fee on a statement divided by the card sales it covers. If you paid $412 in fees on $18,500 of card sales, your effective rate is $412 ÷ $18,500 = 2.23%. It is the single most useful number for comparing processors, because it includes everything the headline rate leaves out: per-transaction fees, debit fees, fixed monthly fees and one-off charges. The revised Code of Conduct requires statements to show your effective merchant discount rate for each card type, so much of the data is already on the page.
This guide is part of the estimates and choosing section. The statement below is illustrative.
What a Canadian statement must show
Under the Code of Conduct for the Payment Card Industry in Canada (revised version in effect since 30 October 2024), you must receive or have access to a monthly statement with:
- the effective merchant discount rate for each card type you accept;
- the rate and amount charged for each fee category, including interchange and network fees where applicable;
- the number and volume of transactions by type.
On flat or blended plans, the statement can instead show the per-transaction rate and any fees not included in it. Details are in merchant rights under the Code.
Note that the Code's effective merchant discount rate per card type usually covers the processing and network fees for that card type. Your all-in effective rate, as used on this site, also includes fixed monthly fees and one-off fees. Calculate both.
Step by step
- Find total card sales for the month (gross, before refunds) and the number of transactions.
- List every fee line, including those at the bottom of the statement and any fees billed separately (terminal rental, gateway, POS software if from the same provider).
- Group the fees into four buckets: pass-through (interchange and network fees), processor markup, debit fees, fixed and one-off fees.
- Add the buckets to get total fees.
- Divide total fees by card sales for the all-in effective rate.
- Divide (markup + debit + fixed and one-off) by card sales for the part your processor controls.
- Repeat for two more months and average them.
Worked example: an illustrative statement
| Statement line | Volume / count | Amount |
|---|---|---|
| Visa credit sales | $7,200 / 190 | – |
| Mastercard credit sales | $4,300 / 110 | – |
| Interac debit sales | $7,000 / 260 | – |
| Total card sales | $18,500 / 560 | – |
| Interchange (Visa + Mastercard) | $158.70 | |
| Network / assessment fees | $14.95 | |
| Processor markup 0.30% on credit | $34.50 | |
| Per-transaction fee $0.10 on credit | 300 | $30.00 |
| Interac debit fee $0.09 | 260 | $23.40 |
| Terminal rental | $29.00 | |
| Monthly account fee | $10.00 | |
| PCI programme fee | $8.95 | |
| Chargeback fee | 1 | $25.00 |
| Total fees | $334.50 |
- All-in effective rate: $334.50 ÷ $18,500 = 1.81%.
- Pass-through cost: $158.70 + $14.95 = $173.65, or 1.51% of credit volume ($11,500).
- Processor-controlled fees: $334.50 − $173.65 = $160.85, or 0.87% of all card sales.
- Without the one-off chargeback fee, a "normal" month: $309.50 ÷ $18,500 = 1.67%.
The last figure is the most comparable with quotes. Check it with the card fee calculator: enter $11,500, the combined rate, the per-transaction fee and fixed fees.
Red flags on a statement
| What you see | What to ask |
|---|---|
| A fee you do not recognise | What is it, where is it in the agreement, and when was I notified? |
| A rate higher than the quote on some cards | Which category, and is it in the cost per transaction disclosure? |
| A monthly minimum fee in a slow month | What is the minimum, and was it disclosed? |
| PCI non-compliance fee | What do I need to do to stop it? See PCI compliance fees |
| A new fee with no notice | The Code requires 30 to 60 days' notice; if not given, you can leave without penalty |
| Network fees much higher than interchange suggests | Are network fees passed through at cost? |
| Debit charged as a percentage | Can debit be priced per transaction? See Interac debit fees |
Fees deducted versus fees billed
Some processors deposit your sales net of fees every day; others deposit gross sales and debit fees once a month. Either way, record gross sales as revenue and fees as an expense in your books. Netting them makes your effective rate invisible and your sales understated. Settlement timing is covered in settlement holds, reserves and payouts.
Turning the result into a decision
- If your processor-controlled share is well above what competing quotes offer on the same month, it is worth comparing; see comparing processor quotes.
- If most of your cost is pass-through, a new processor will not change much; look at your sales mix (debit, tap, discounts for cheaper methods) instead.
- If fixed fees are a large share, ask to remove them or consider a plan without them.
- Check whether you are eligible for the small business interchange reduction and whether you see it.
FAQ
What if my statement has no interchange lines?
You are probably on a flat or tiered plan. Your effective rate is still total fees ÷ card sales. You cannot split pass-through from markup, but you can compare the total with interchange-plus quotes.
Should I include terminal rental?
Yes for the all-in rate, because it is a cost of accepting cards. Calculate a version without it to compare with quotes that price equipment separately.
My provider has an online dashboard instead of a statement. Is that allowed?
The Code allows statements to be provided or made accessible. Download and keep monthly copies, because online history can be limited.
Sources
- FCAC: Accepting card payments — merchant statements and disclosures under the Code
- Financial Consumer Agency of Canada — full Code text
- Canada Revenue Agency — business expenses and record keeping
