You just get a discount merchant account at a quoted discount
rate of 1.79% for your store. But, lo and behold, when your
account statement for your initial month's processing come up,
you are surprised to discover that many of your customers' transactions
were processed at a much higher rate than the one quoted to
you. Believe me its not a pleasant surprise.
Fact remained that you are not alone. In fact, no one can deny
that the majority of merchants don't really understand how merchant
account discount rates are applied and calculated.
Thats why, it is important to throw a little light on what's
In simple terms a Discount Rate is a charge that is levied on
each transaction you process through your merchant account and
is calculated as a percentage of that transaction's dollar amount.
Furthermore it is worthwhile remembering that the discount
merchant account Rate that most applicants are quoted when
searching for a credit card processing solution is what is known
as the Qualified Rate. Your processing company judges the Qualified
Rate by initially analyzing the InterBank Exchange rate that
VISA and MasterCard levy - this InterBank Exchange fee charged
by the credit card companies is the same for all banks and processing
companies. Then after that the banks and processors add on a
further percentage to that fee (this is part of the profit they
make) to come up with the Qualified Rate they charge to their
On the other hand in the case of a retailer, the current Qualified
Rate is in the 1.70% to 1.85% range - and for phone and mail
orders, as well as internet processing, the range is commonly
2.25% to 2.49%. The latter range is higher because of the simple
reason that in those types of transactions, the merchant does
not have the customer's physical credit card present - so the
risk of fraud is greater than it is for retail 'card present'
So far so good large chunk of merchants understand things
to this point. But it is worth mentioning in this regard that
there are certain risk factors that can cause your transaction
to be levied with an additional percentage charge. More often
than not these surcharges are extracted on 'Mid Qualified' and
'Non Qualified' transactions. Theoretically speaking the surcharge
for Mid Qualified transactions is usually in the .75% to 1.25%
range and for Non Qualified is generally 1.50% to 2.00%. Point
to be noted in this regard is that these are charges on top
of the standard Qualified Rate.
So the million-dollar question is: What are the most widespread
circumstances when either Mid or Non-Qualified surcharges may
* Mid Qualified: (a) for phone and mail order in addition to
internet transactions, where there is no AVS (address verification)
match; and (b) furthermore where a retail merchant manually
keys-in the transaction because the credit card is present but
fact remained that it cannot be swiped, or keys in an order
where the card is not present (e.g. a phone order).
* Non Qualified: (a) for phone and mail order as well as Internet
sales, where the transaction is keyed-in but is not find a place
in daily batch out of that day's transactions. (Note: where
a person keys in his information on a website, the major chunk
of gateways do the 'batching' automatically. Thats why for
internet processing, this is not generally a concern); (b) where
a retail merchant doesn't batch out daily; or (c) where the
transaction is made utilizing a corporate, a non-U.S., a business
or a government credit card.
Keeping these things into account, if many of your customers
reside outside of the United States, or use corporate, government
or business cards, you can always do yourself a big favor by
negotiating as low as possible Non Qualified Discount Rate.
Its your bad luck, there are another fifty or so other factors
that can affect the discount rate you'll be charged (no-one
said it would be easy to understand all this!). These include:
* high risk merchants as is evident with the name can expect
higher discount rates across the board
* Moreover Visa Signature Reward Cards and MasterCard World
Cards have surcharges applied
* On the other hand if the customer's order is not shipped within
24 hours, a surcharge may be levied
Because of this simple reason prior to signing on for your discount
merchant account make sure that you carefully read the
provider's complete array of criteria for evaluating what discount
rate will be applied to a particular sale. And most importantly
speak with your agent if you have any questions.
It is essential to find out if discount
merchant account services are available for your company
by browsing Websites of potential lenders. Of course by checking
application guidelines, you will soon see whether you quality,
and if so, how to apply and enhance your chances of being approved
for this account. It is worth mentioning in this regard that
getting a merchant account makes you eligible to accept credit
card payments. After that just give a thought of how greatly
your sales volume could increase when you allow customers to
pay with credit instead of insisting on cash or checks. There
is no hiding the fact that they will love you for providing
this option, and your sales volume could quickly skyrocket when
happy customers come to visit with plastic in hand.
In an ideal scenario a discount
merchant account lets you provide credit payment options
at one low price. To illustrate this point consider an example,
after paying a possible application and setup fee of perhaps
$100, you may be charged just $19.95 per month for the options
of accepting credit card and debit payments as well as e-check
processing and related services. But for that to happen you
have to be careful when shopping for a merchant account, as
there may be all kinds of hidden fees that are not listed on
the home page. More often than not, these may be buried in fine
print or posted on a distant link from the home page. In that
case you need to find out in advance what the costs will be
and how you will be expected to pay them. For example, it is
advisable to ask about an online application fee, a membership
fee, and a setup fee, among others, if you dont see these posted.
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