When you accept payments, funds get automatically deposited into your bank. This generally happens within 3 business days. By the way, TCM deposits your funds in less than one day. The funds being deposited into your account is also called settlement.
One of the options that our merchants get to choose is whether they want to receive their daily funds as a gross amount or as a net amount (net of processing fees). Many payment processors do not give you a choice, but for processors that do, it’s good to know the difference.
What is gross settlement?
When you choose to receive your daily deposit as a gross amount, the total amount deposited equals the amount you processed (this is the total of your settled batch). For example, if you processed $1,000 in credit cards for the day, on the next business day, $1,000 will get deposited into your bank account. On the last day of the month, your processing fees for all of your settled batches from the first day of the month to the last day of the month will get deducted from your bank account.
Some people like this so they can reconcile what they sold to the deposited amounts in their bank. Since payment processing fees are separated, it can be easier to calculate.
What is net settlement?
If you choose a net deposit option, your credit card processing fees will get deducted from your bank account on a daily basis and the net amount gets deposited into your bank account. Using the same example above, if you process $1,000 for the day, the amount deposited the next day is net of the processing fees. Assuming your fees are $17, you will receive a deposit for $983.
On the last day of the month, your monthly fees (account fee, PCI fee and any hardware or POS rental fee) will get deducted.
Pros and cons of net vs gross settlement
Gross settlement
Gross funding maximizes your cash flow since you delay paying fees until the end of the month.
Gross funding allows for more streamlined reconciliation by matching total processing amount with the amount deposited into your bank account.
Net settlement
- Net funding allows you to better plan your cash outflow by paying your processing fees daily rather than at the end of the month.
- Net funding may result in additional reconciliation between daily processed amount and amount deposited into your bank.
