By Margie Ragland- Corporate Sales Administration Manager
If you’re like most merchants these days, operate competitively and still turning a profit is a challenge. Accepting credit card payment is an essential part of doing business and in order to remain competitive in today’s marketplace you must operate as efficiently and profitably as possible: including accepting credit card payment as cost effective as you possibly can.
Below I offer some simple practices to avoid downgrades when processing your credit card payments. Be sure to take note: you’ll be glad you did!
First, what is a downgrade?
A downgrade is an increased interchange/discount rate charged by both the credit card associations (VISA, MasterCard, etc.) and your processing company. These downgrades can occur when you accept certain types of credit cards or because of the way the card transaction was processed.
In order to run your business, you cannot deny a customer from using certain credit card types, thus you will have un-avoidable downgrades.
There are three tiers of downgrades:
- Qualified transaction
- Mid-qualified transaction
- Non-qualified transaction
I will provide a brief explanation of each below:
Qualified Rate: As is the norm with most processing companies, the “Qualified Discount Rate” is the lowest rate you (the merchant) will be charged to process a credit card.
To receive the “Qualified Rate” the following are required:
- The credit card is present and swiped through a card terminal (and correct cardholder data is captured through swipe)
- The cardholder is present
- The card being used is a standard consumer credit card
- Cardholder signature is captured
Mid-Qualified Rate: A “Mid Qualified Rate” is a slight downgrade from the “Qualified Rate” and is charged with any of following:
- Credit card is manually keyed with AVS (address verification) information entered.
- If a rewards card is used (Yes, you as the merchant have to pay for Sally’s Southwest Airlines rewards points!)
- The Merchant not batching/settling transactions within 24 hours
Non-Qualified Rate: A “Non-Qualified Rate” is the highest discount rate, which I have personally seen as high as 4.5%. This rate will be charged when one of the following occurs:
- Credit card is manually keyed without address verification information being entered
- Authorization code is manually keyed in to your processing terminal
- Merchants not batching/settling transactions within 48 hours
To avoid downgrades, make sure to do the following:
1. Take as many transaction as you can in person (card present/card swiped) and verify with AVS
2. If you take most of your orders over the internet (MO/TO) be sure to ask your processor if you are set up to receive the best rate possible given that internet/telephone orders are your primary transaction type.
3. Inform your employees: make sure they understand it is better to swipe a card rather than type in the number and be sure to get AVS information.
To watch a live demonstration of the process and more great tips, visit our website at www.eBridgeGlobal.com/merchant-services