Merchant Account Services Credit Card Processing Tips » Wholesale Rates

Qualified Rate Structures

Guest Author — Sat, 04 Feb 2012 10:23:55 +0000

Rate Structures And How They Are Determined

Rates and fees charged by a merchant account provider can vary in numerous ways, including the manner in which the transaction with the customer is conducted by the vendor. When a vendor charges the credit card of a “regular” customer in what is called a “standard” transaction, they will be charged fees at the lowest qualified rate by the merchant account provider.

Exactly what constitutes a “standard transaction” will be defined by the provider; however it will generally be the “safest” method of performing the transaction. That is, there is little doubt as to the authenticity of the purchaser; they have been properly validated, etc.

Over the internet, the purchaser could be pretty much anyone

The easiest way of thinking about qualified rates is to imagine transactions conducted over the internet, and transactions done in a retail store. Over the internet, the purchaser could be pretty much anyone, with credit card details they happened to come across, and the goods they are purchasing could be about to be delivered anywhere (even over the other side of the world). The potential for fraud is massive and so the vendor in this instance will usually get an unqualified rate.

Compare this to the transaction that happens in an actual store. While the potential for fraud is still there, the vendor is able to verify the identity of the holder of the credit card (including that they actually possess the card and haven’t just found some random numbers on the internet), and there are also no concerns regarding shipping. Such a transaction will usually be deemed to be qualified by merchant account providers.

Mid-Qualified Rates

A provider will charge a mid-qualified rate in instances where the fully qualified rate cannot be applied, or the rate does not apply to the particular transaction for some reason. This may be because of:

a rewards credit card being used (i.e. shopping points, consumer points, air points, etc);
a cash bank card being used (i.e. 1% of all purchases back in cash); or
other reasons such as the credit card number being keyed in to the point-of-sale machine instead of the card being swiped (as they do for pizza deliveries).

In fact, processing transactions that involve reward and cash back cards can make up a very large percentage of the interchange costs involved.

Non-Qualified Rate

As discussed above, the non-qualified rate of a merchant account provider will usually entail the highest amount of interchange fees being levied on the transaction. A transaction may be classed as non-qualified for several reasons including:

proper identity and address verification procedures not being performed;
transaction settlement times not being adhered to (note that there may also be additional penalties, fees and other action taken as a result of this); and
Where information that would normally be provided in a “standard” transaction is not provided, either due to the special nature of the transaction or otherwise.

Merchant Solutions IQ is dedicated to saving merchants money on what they already have to pay. We believe that educating our merchants about the industry is the best way to earn and keep your business.

We perform custom rate analysis free of charge no obligation to any merchant who asks. Just contact me, Kevin at ksarisky@merchantsolutionsiq.com for more information.

What are Non-Qualified Transactions and How Can Merchants Avoid Them?

Guest Author — Mon, 16 Jan 2012 06:06:49 +0000

What are Non-Qualified Transactions? How Can Merchants Avoid Them?

How can merchants avoid being charged these surcharges and still qualify for the best rate possible?

I frequently get calls from merchants who say they were quoted one rate, but claim different rates are showing up on their statements. Unfortunately, merchants can experience a rate increase or surcharge because of the type of card your customers are using, such as sky miles cards and rewards cards. Another cause of increased processing costs is transactions being processed incorrectly by the merchant.

First, it is important to understand the different types of transactions that can occur when running a credit card sale:

Retail swiped account transactions will get a Qualified Discount Rate, which is the lowest rate possible. In this type of transaction the card holder is present, they are using a standard consumer credit card, and once the card is swiped the transaction is batched within 24 hours. If any of these criteria change, you could downgrade to a MID-Qualified or a Non-Qualified transaction, thus increasing your rate.
A keyed transaction, or manually entered transaction, will get a MID-Qualified Rate. This can also occur if AVS (Address Verification Service) is not entered when the customer uses a rewards card, or if the transaction is not batched within 24 hours.
A Non-Qualified transaction occurs when a card is key-entered with no AVS info, or if a Corporate, Government, or International Card is used.

If you are not able to swipe a card because you are using an online payment gateway, how can you also take advantage of better pricing? When processing a MOTO (Mail Order Telephone Order) or Ecommerce transaction make sure to do the following.

Make sure all required AVS information is entered
Set your payment gateway or terminal to batch or settle within 24 hours
Enter an Order or Invoice number
Make sure to enter the CVV2 number

Many different factors can determine the rate you are assessed on your transactions. If you know you are going to be taking card types that will typically fit into the Non-Qualified category described above, be smart when setting up your credit card processing account – make sure to find out what your Non-Qualified rate will be. Be sure to find out all the fees involved before signing on the dotted line.

We perform custom rate analysis free of charge no obligation to any merchant who asks. Just contact me, Kevin at ksarisky@merchantsolutionsiq.com for more information.

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