Understanding Merchant Account Discount Rates
It's astonishing to know that many merchants are unaware of how discount rates work with their merchant accounts. Understanding how they work can mean a huge savings of hundreds and maybe thousands, of dollars each month. The discount rate is the percentage of sales amount that the bankcard acquirer charges the merchant for the settlement of the transaction. The card associations can change or raise this process fee on a regular basis. Discount rates are divided into 3 levels for merchant accounts and are called qualified, mid-qualified, and non-qualified. Qualified rates are the lowest and are commonly advertised and quoted by merchant service providers because they are the most attractive. These rates are considered to be standard. Merchants are charged qualified rates when they accept regular consumer credit cards. When the discount rate has been downgraded, that means a business has been charged the higher mid-qualified or non-qualified discount rates. Mid-qualified rates are the next highest percentage rates. These rates are charged whenever a consumer credit card is manually keyed into a credit card terminal instead of being swiped. A credit card transaction would also be charged the mid-qualified rate if the credit card is a rewards or business credit card. Non-qualified rates are the highest percentage rates that can be charged to a transaction. There are several reasons why a merchant account will downgrade to a non-qualified rate can occur: A consumer credit card is manually keyed into a credit card terminal instead of being swiped and address verification is not performed; When a special credit card, such as a rewards or business credit card is used; A merchant does not settle their daily batch for their merchant account within a specific time frame. Retail merchants are setup to take credit cards by swiping the credit card through a terminal by hand; a "card present" transaction. If a merchant keys in a credit card transaction instead of manually swiping the credit card, then those transactions will downgrade to a mid or non-qualified rate. Not using the Address Verification Service for all "card not present" transactions will have merchants paying the non-qualified rates. AVS is the process of validating a cardholder's given address against the issuer's records to determine accuracy and deter fraud. This service is required as a part of credit card authorization for mail order / telephone order transactions. Another reason for transactions to downgrade to non-qualified rates would be when a merchant fails to settle their daily batch within the allotted timeframe. Credit card transactions remaining on a merchant's terminal are stored in an "open" batch. They will remain there unless the merchant "batches out". Once the merchant batches out, the daily sales are submitted for processing, and the batch is now "closed" or "settled". This should be done on a daily basis. Some merchant account providers have equipment that come with auto-batch software, which will settle their batches automatically each day. Every month when you receive your monthly merchant account statement, make it a habit of reviewing your mid and non-qualified transactions. If you notice a big difference from month to month, you should work with your processor to see if an adjustment is possible for your service. |
