Credit Card Fees -- Reward vs Qualified

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Some have pointed out that Reward cards used by consumers are actually charged a higher fee to the practice than "qualified" cards.

Just something to think about.

No connection with the merchants below, just passing on their info.

Locke, MD

Here is some info...

http://www.sagebankcard.com/insider_report.pdf

http://www.techsoup.org/learningcenter/funding/page10588.cfm

http://www.merchantaccountblog.com/archives/25

http://www.forbes.com/entrepreneurs/entretech/2007/02/20/visa-americanexpress-globalpayment-ent-fin-cx_mf_0220creditcard.html

Saving On Credit Card Processing Fees

http://www.startupnation.com/NET_ROOT/print_template/PrintContent.aspx?content_id=9247

snip/snip

The 3-tier system is a means to simplify the 125 plus (and growing!) interchange categories that have different fees attached based on such factors as type of credit card used, how the card is processed, and the nature of the merchant’s business. Instead of applying over 125 plus different fees, the fees are categorized into one of three tiers, Qualified, Mid-Qualified or Non-Qualified. Once placed into a particular tier, the fees are averaged out with a margin added. This is essentially how a fee is derived for each tier.

The qualified rate (discount rate) is the best rate available and the one usually quoted by most merchant account providers. The mid-qualified rate is higher than the qualified rate and includes transactions that are keyed in (not swiped), even swiped transactions where the customer uses certain rewards cards, and transactions that are not batched out within 24 hours after a sale has been initiated. The non-qualified rate is the most expensive of the three rates and includes transactions that do not fall under the qualified or mid-qualified rate such as International, government, corporate or particular consumer rewards cards. A transaction can also be downgraded to this rate if the Address Verification System (AVS) is not used, there exists an AVS mismatch where the customer’s billing address does not match the address associated with the customer’s card, or a transaction is not batched out within 48 hours after processing a sale.

http://www.gotmerchant.com/internet_merchant_accounts/processing_fees/

Complete Merchant Account Rates & Fees The fees mentioned below exclude the applicable transaction and monthly fee for the service you are interested in.

Qualified, Mid & Non-Qual Rate Visa & MasterCard have several dozen rates ranging significantly in price, known as Interchange. To simplify the billing, merchant account providers group these rates into three or four pricing categories:

Qualified Discount Rate The discount rate you see advertised is referred to as your qualified rate and is a percentage taken from every dollar charged.

Mid-Qualified Rate

Retail (Card Swiped):The mid-qualified rate is added to your qualified rate and will apply when you key in a transaction or if you are with a provider who downgrades some reward cards to this particular rate (more details on rewards below).

All Others:The mid-qualified rate normally does not apply to any merchant keying in their transactions, unless you are with a provider who downgrades some reward cards to this particular rate (more details on rewards below).

Non-Qualified Rate The non-qualified rate is added to your qualified rate and applies to certain card types, such as business or corporate, as well as some consumer cards. Other situations will also cause your transactions to automatically downgrade to this rate, such as not using Address Verification Service (AVS) on any keyed in transactions or not batching out within 24 hours of processing a particular sale.

Reward Cards In early 2005, Visa & MasterCard made everything a little more complicated by creating separate rate categories for reward cards . According to Visa, 40% of consumer cards are now reward cards . Instead of adding a hefty mid or non-qualified rate to these types of transactions like most other merchant providers, Gotmerchant.com has created totally separate rates that are less expensive! For example, for Visa reward cards, it will be either an additional 0.20% or 0.35%, which is a lot cheaper than a mid or non-qualified rate. Please refer to our application for full details.

Address Verification Service (AVS) AVS is a fraud prevention service that validates the cardholder's billing address provided in the order against the card issuing bank's records. You must use this service on all keyed-in transactions or they will automatically downgrade to your non-qualified rate per Visa/MasterCard rate schedule.

Monthly Minimum Fee To help maintain a level of excellent service and support to our merchants, our accounts come with a monthly minimum. The minimum is calculated by multiplying your qualified discount rate against your total sales for the given month. This amount is then subtracted from your minimum and you are charged the difference. For example, if you had $750 in sales for January and are paying 2.00% as your qualified rate, you would be charged the difference of $5.00 with a $20 minimum. Ex: $20.00 - ($750 X 2.00%) On the other hand, if you processed $1,000 in charges, you would not be charged anything as it equals or exceeds the minimum. Keep in mind you are only charged the difference and not simply a flat rate.

Annual Fee Gotmerchant.com charges NO annual fee!