Processors will often quote the lowest rate for a single card type and not give you an explanation of the other rates and fees you will be charged. This is what is known as bait and switch pricing. The processor will bait you with a low rate and charge you a higher rate in a different card category. For example they will quote a check card rate of 1.39% of which only maybe 20 percent of your transactions will be processed at, depending on your business. But 50 percent of your transactions will be processed at an unusually high credit card rate of 1.90%.

Processor advertising can be very misleading when it comes to rates and that is why a thorough understanding of credit card rates will help you make the best decision for your business. The most common rate structures to be aware of are 3-tier pricing, 4 tier pricing, and Interchange Plus Pricing.

3-tier Pricing

The 3 tier pricing is a popular pricing method and a simple price structure that gives a discount rate, mid-qualified rate, and a non-qualified rate. Each tier is given a certain rate that is matched to a certain criteria.

First Tier: Qualified Rate

A qualified rate is the percentage rate a merchant will be charged whenever they accept a regular consumer credit card and process it in a manner defined as “standard” by their merchant account provider using an approved credit card processing solution. The card must be swiped and read by the processing terminal to qualify for this rate.

Second Tier: Mid-Qualified Rate

The mid-qualified rate is also known as the partially qualified rate. The mid-qualified rate is the percentage rate a merchant will be charged whenever they accept a credit card that does not qualify for the lowest rate (the qualified rate). This may happen for several reasons such as:

• A consumer credit card is keyed into a credit card terminal instead of being swiped
• A special kind of credit card is used like a rewards card or business card.

This rate is found by adding the qualified rate plus the mid-qualified rate. It is normal for this rate to be higher because the processor is charged more by the issuing bank for these card types.

Third Tier: Non-Qualified Rate

This is the highest rate a merchant will receive from a credit card processor. This may happen for several reasons such as: ·

• A consumer credit card is keyed into a credit card terminal instead of being swiped and address verification is not performed ·
• A special kind of credit card is used like a business card and all required fields are not entered.
• A merchant does not settle their daily batch within the allotted time frame, usually past 48 hours from time of authorization.

4-tier pricing

The main difference between 3-tier pricing and 4-tier pricing is the separation of the credit card and check card rate. In 3-tier pricing check cards are processed at the same rate as a credit card. But in 4-tier pricing, check cards are processed at a lower rate. You will want to process in a 4-tier system if you have a high percentage of check card transactions. Often the credit card discount rate will be higher but you can experience significant savings on your check card transactions.

Interchange-Plus

Merchants who have a higher processing volume usually above $10,000 a month often take advantage of Interchange-Plus processing. The easiest way to explain Interchange-Plus Pricing is that you pay the cost your processor incurs from the issuing bank for each different card type and a few extra basis points depending on your total monthly processing volume.

For example: If you have a Monthly processing volume $25,000 or more, you can be charged 10 basis points above interchange. This makes a swiped debit card at 1.03% to the issuing bank and 0.10% for processing for a total of 1.13%. For a swipe Visa Business card you will be charged 2.40% and 0.10% for processing for a total of 2.50%. For interchange exact interchange rates and fees visit Visa Interchange Rates and Master Card Interchange Rates.

I hope this article was able to provide you with enough information to make an informed decision for your business. Realize there is more than one rate when it comes to processing credit cards for your business. So whenever you are looking to set up a merchant account ask, “What is your rates?”

Based on your current monthly average of credit card processing sales volume (Visa/MasterCard/Discover), receive a lump sum of $10,000 to $100,000 from Cash-On-Demand—And grow your business with it any way you want!Beyond your monthly expenses, do you have the funds available for:

• Equipment upgrades?
• Crucial improvements?
• Your plans for expansion?
• New promotions and advertising?
• Or, anything else that’ll grow your business?

“Turn strangers into friends. Turn Friends into customers. And then…do the most important job: Turn your customers into salespeople.”

Most people in the world have never heard of your business and would buy from you if they only knew about you and were convinced that your offering is worth paying for.

But how on earth are you going to get them to know about you? You don’t have enough money to get your message to all the people who need to hear it. Nor do you have enough people to get your message out. But you do have untapped assets that are underused. These are your friends and customers. How do you bridge this gap of your customers and their friends. Gift Cards!

Provide service that is so amazing your customers will want to tell their friends about your business. Let them buy a gift card that says to your future customer: ” I believe in this place, go and enjoy yourself.” Make all of your customers and friends your personal salesforce with gift cards. Then see your Gift Cards put more money in your pocket and help you get your message and brand out. 

For more information on how to market and increase sales with gift cards, click here to sign up for our Merchant Solutions newsletter.

Gift Cards can be used in numerous creative advertising campaigns and the card has the ability to sell and promote itself. You can have employees wear a sample card around their neck or as a button on their shirt with a catchy statement about the program. Some stores have contests on who can sell the most Gift cards. The possibilities with Gift cards are endless and the Brand strength they create is priceless.