Credit Card Processing Rates – The Big Six

If you’re new to the merchant services industry, you’ll find that there is a very high level of competition going on among its participants. In choosing an account provider, one usually goes for the one that offers the lowest credit card processing rates. On the other hand, things may not be that simple as the merchant will need to have a good understanding of these rates and how they play a role in the way an account will be handled.

Basically, there will be six types of card rates depending on the type that a customer uses. The PIN-based debit transaction rate is the lowest that a merchant may incur. It is based on debit or ATM cards which, when connected to a checking account, may be used for an ATM transaction using a four-digit personal identification number. The card bearing a VISA or Master Card logo can also be used with the charges recorded as PIN-based debit charges. Hence, the user is charged for a PIN-based debit transaction fee.

At least 60% higher than the debit transaction rate is the check card rate which is charged to the customer who uses his debit card as a credit card. A merchant may avoid this charge by having the customer enter his PIN on a PIN pad. Once the PIN s entered, the card will register as a debit card. PINs only apply to debit cards.

Coming a close second to debit transaction rate is the qualified rate which the merchant pays when a customer uses a typical VISA or Master Card. If the card is used with rewards or frequent flyer miles, the merchant actually ends up paying for the privilege earned by the customer through a mid-qualified rate which is higher than the qualified rate.

The non-qualified rate is the highest that a merchant will be charged. This is incurred as a customer pays when the card used is a VISA or Master Card issued to a business or the government. This rate applies to credit card payments made occasionally through the telephone. Basically, this is the highest rate simply because the conditions that apply are the most risky. It is also assessed on a card payment which is taken over the telephone. The card is not present at the time of the transaction. The non-qualified rate is the highest rate because it is the most risky. There is a possibility that the owner of the merchant account may go bankrupt or the person maintaining it could commit fraud in handling the card number.

Credit card transactions that are regularly made over the phone or through the mail qualify the merchant for the mail order rate. Compared to the non-qualified rate, which is charged for an occasional phone transaction, the mail order rate is lower and in fact saves the client from being charged a non-qualified rate when a VISA or Master Card payment is used to pay for a purchase.