Three Important Rates

You Need To Know About

Before Choosing A

Credit Card Processor

The first processing statement can be a big surprise because credit card processing statements are riddled with fees. Even a regular statement can catch you by surprise.

The most expensive portion of the statement should be the rates you were charged based on the volume you processed that month.

What is the difference between qualifiying rates, mid-qualifying rates, and non-qualifying rates? Why are they charged that way?

Qualifying Rates

This rate is the one you were probably sold on - it is the most widely sold and talked about rate in the credit card processing industry.

What makes this a "qualifying rate" is the fact that you physically swipe the credit card. In this context, "qualifying" means you should qualify for the lowest rate on your account because the transaction has the lowest risk level to the credit card processor.

The credit card processor assumes you are asking for the customer's identification and comparing signatures on each credit card transaction. They also assume that you will have a signed copy of the receipt as proof of the authorized transaction.

Each of these measures inherantly lowers the risk to the credit card processor so they pass the low cost of processing this type of transaction right back to you.

Mid-Qualifying Rates

This rate is not necessarily for a higher risk transaction but more of a higher cost transaction for the processor. The processor will charge you more when a rewards card or specialized credit card is swiped - and this example is typical of a mid or non qualifying rate.

Rewards programs, loyalty programs, and other specialized credit or debit cards typically carry a higher processing charge because it costs the processor more due to the added technology and personnel required to track and ensure those programs are implemented properly.

Another way a credit card could cost you the mid-qualifying rate is the mere fact that the card could not be swiped. If you punch in a credit card number, and add the zip code and address, you typically won't see the highest, non-qualifying rate charge on your credit card processing statement.

Again, these higher costs are passed on to you - and we are seeing a higher volume of rewards cards being distributed. Often, these rewards programs are free to the consumer. Obviously, it is not free for a business.

Non-Qualifying Rates

This rate is the highest risk and the highest cost for businesses and processors alike.

Fraud is the primary cause for this rate being so high. The risk is in a combination of factors: a punched in credit card number because it couldn't be swiped, zip code and address weren't entered, and the card could be a rewards card.

The best way to avoid this type of charge is to simply verify and enter every single detail possible into the transaction, and keep a carbon copy of the card as a receipt in case a charge back or instance of fraud does occur.

While fraud is rare, it costs businesses and processors hundreds of millions of dollars every single year - and most of those fraudulent transactions are what caused processors to charge varying rates based on their cost and risk associated with a specific type of transaction.

Next time you get a statement, review the Qualifying rate charges, Mid-Qualfying rate charges, and Non-qualifying rate charges. If you see a fair amount being charged in the mid and non-qualifying rates, educate your employees on getting as much data as possible to lower the risk and cost levels associated with those charges.

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