Understanding the cost of credit card processing solutions is important for all credit card processing merchants. The merchant service industry has developed over the years, a unique system and language. This language is bandied about by merchant service salespeople and too many credit card processing merchants nod knowingly either in an effort to avoid appearing unaware, or to expedite their escape from the sales pitch. Unfortunately, not understanding the terms can cost credit card processing merchants dearly. Merchant Processing
The merchant fees associated with processing and the terms describing those fees are common among most processors. The terms may have slightly different meanings depending on the processor. Some processors prefer to use sweet sounding or powerful words to denote a cost, but the cost is still a cost by any name to the credit card processing merchants. Credit card processing merchants should make themselves aware of the following typical costs and terms for those costs used by the top credit card processing companies.
The discounts rate is the fee that a merchant’s bank (the “acquiring bank”) charges the merchant. The discount rate includes the interchange rate which the “acquiring bank” pays a customer’s bank (the “issuing bank”) when merchants accept cards. In a transaction, the purchaser’s bank receives the interchange fee from the seller’s bank. The purchaser’s bank then pays the seller’s bank and processor the amount of the transaction. The discount rate plus any transaction fees is then collected from the merchant by the acquiring bank.
Interchange-plus pricing is too often an uncommon rate alternative offered to merchants. However, it may be the wisest choice of pricing available to aware and knowledgeable merchants. This rate is simply put, a fixed markup plus the actual processing charges. This equates to actual costs of interchange (cost of processing) plus small fixed profit for the processor. This pricing is far less confusing
The qualified rate is the lowest possible rate paid for credit card transactions by credit card processing merchants. They are charged for regular consumer credit card (non-reward, etc.) transactions that are swiped on-site; a signature is collected, and batched within 24 hours of the transaction. The qualified rate is the percentage rate charged to credit card processing merchants for “standard” transactions. The definition of a “standard” transaction may vary depending on the processor.
The mid-qualified rate is charged for some of those transactions that do not merit the “qualified rate.” This rate is sometimes called the partially qualified or mid-qual rate. Credit card transactions which do not qualify for the “qualified rate” may be keyed in rather than swiped, the batch may not be settled within 24 hours, or the card used is not a standard card, but a rewards, foreign, or business card for example.
The non-qualified rate is applied to all transactions that do not meet qualified or mid-qualified standards. The non-qualified rate is the highest rate charged to credit card processing merchants for credit card transactions. This rate may be applied on the conditions that the card is not swiped, address verification is not sought, rewards, business, foreign etc. cards are used, and the merchant does not settle the batch within 24 hours of the initial transaction