Processing Definitions & Examples
There are four base categories of credit card (CC) rates you will be charged by VISA/MC every time you accept a Credit Card.
- Debit Cards or Check Cards
- Qualified Cards (aka) Tier 1
- Reward Cards (aka) Tier 2
- Corporate or Business Cards (aka) Tier 3
QUALIFIED (aka Tier 1)
This is a credit card that gives the card holder no benefits or rewards, just the right to make a charge for goods or services. This type of card is usually a very low limit card and often carries a very high interest rate, given to low credit scores and first timers. VISA/ MasterCard are issuing these cards less and less. This card typically makes up 10 to 20 percent of your sales.
MID-QUALIFIED (aka Tier 2)
The Mid-Qualified rate covers the REWARD CARDS which offers something back whether it is POINTS, MILES, GIFTS, and OR EVEN CASH. The majority of the cards being issued today are REWARD Cards. Why should you as a merchant care? You, the Business Owner(Merchant), are paying for all those FREE Rewards, through higher FEE’s.
NON-QUALIFIED (CORPORATE AND BUSINESS CARDS) (aka Tier 3)
Corporate Cards are issued to Small Business Owners and Small Corporations. These cards have been issued by the Visa/Mastercard Banks to offer an alternative to American Express. The rates you, the merchant, pays on these types of cards is the highest percentage.
DEBIT CARDS
These are the cards that should make the merchant most happy. They are the lowest rates that Visa/Mastercard charge. Payment is taken right out of the customer’s checking account and credited to your Merchant Account, so there is almost no risk to the banks or processors; that is why the fee/rate is lower.
TRANSACTION FEES
Every time you accept a card and enter it into either a terminal or accept it over the Internet a fee is charged to connect to the Processors Computer System either thru 800 numbers or a gateway via the Internet.
BATCHES
When you have finished your business for the day you must close out your transactions or the Daily Batch. This begins the transfer of funds to your bank account. If you do not batch out within 24 hours, all of your sales will fall into a Higher Percentage Rate due to your failure to send a daily batch to Visa/Mastercard.
Keyed Transactions Telephone/Mail Order called MOTO and Internet Orders are higher due to the increased risk for a fraudulent transaction since the card is not present at the sale and as you can see above rates for keyed transactions are higher due to the risk.
Assessments – This is a simple charge to each transaction which pays for advertising, salaries, and all the other things it takes to run the Visa/MC Association.
Discount Credit Card Processing Fee – This is the fee we will charge you to transact a sale, move funds and deposit the money into your bank account.
Monthly Statement – The monthly statement gives you a summary of your monthly deposits and any additional fees.
Batch Fees are charged when you close your daily sales at the end of your business day. Batch out must be done not only to begin the funds transfer process, but, also, to save money. In the event you do not close out the daily batch within 24 hours of the first transaction then all the sales for the day will be downgraded to a higher percentage rate costing you, the merchant, more money.
WHAT IS INTERCHANGE?
Interchange is the transfer rate exchanged between the merchant’s and cardholder’s financial institutions each time a Visa payment product is used. Its primary role is to create the right balance of incentives between cardholders’ financial institutions — which promote and issue Visa cards to consumers — and merchants’ financial institutions — which enroll and process Visa transactions for merchants.
Interchange powers the payments system, which enables financial institutions to connect to merchants and cardholders all around the globe. It assures that financial institutions invest in the Visa system and the benefits that all cardholders enjoy — from protection against fraud to car rental insurance to airline miles to 24/7 customer service. And by balancing the economics among all participants, interchange encourages more merchants to accept Visa.
HOW INTERCHANGE WORKS
When you the merchant accepts and process a sale the percentages listed are applied to your account based on the category the MC/VISA credit card being presented to you the merchant. The customer’s card will dictate the rate.
IS INTERCHANGE THE BEST SOLUTION FOR OUR BUSINESS OR NON-PROFIT?
Because all of the national retail chains insist on receiving interchange from their processors and due to the many categories of cards issued, no three tier rate (qualified, mid-qualified, non-qualified) will allow each sale to hit the lowest rate offered for that particular card. In other words if you have a mid-qualified rate of 2.49% and the card you swipe under interchange is charged 2.29%, your business saves about a 5th of a point. Is that a lot? You bet it is over the course of a month or year. That is why we like to place our clients on Interchange. Most of our clients feel more comfortable with a quoted rate so they sign up with Tiered Pricing but we like to show our customers how they can lower their rates by placing them on an Interchange Plus Program. After 3 months of processing we like to evaluate our clients statements and show them how we can lower their rates.
To view the 2011 VISA and MasterCard Interchange Rates, Please Click on the Links Below:
http://usa.visa.com/download/
http://www.mastercard.com/us/
