My Merchant Account Blog

Non-Qualified Rate

Wednesday, October 19, 2011

There are a few different reasons a credit card transaction might be downgraded to the non-qualified rate:

• credit card association assessing extra charges for rewards or business cards
• Lack of timeliness: when a transaction is run, the money is guaranteed for a specific period of time. This is the reason most processors run a daily transaction batch
• A keyed-in transaction. In this case, the risk of a chargeback is higher because there is a good possibility the cardholder is not present and therefor there is no guarantee the transaction isn’t fraudulent
• Not running an address verification service (AVS) despite having an internet account. This runs a higher risk chargeback

Because some addresses cannot be verified (i.e., your customer lives overseas), this structure makes things more profitable for the merchant account provider. For example, if your standard rate is 2.15%, your mid-qual rate is .5%, your non-qual rate is 1% and you can’t run an AVS, that transaction is going to 3.65%.

Mid-Qualified Rate

Wednesday, October 12, 2011

This rate is charged for card transactions that don’t quite make the criteria for the qualified rate. The mid-qualified rate would be charged for a card which has to be manually keyed in (using an address verification service, or AVS) instead of being swiped through the card reader. In this instance, the card number, expiration date, address, zip code and CVV code must all match. If they don’t match, the card may be downgraded to the "non-qualified" rate.

Business cards and rewards cards fall within the mid-qualified group. Some providers have this "mid-qual" rate in their structure to help increase their income. Merchants usually don’t even know they are being charged the rate until they review their statement.

Also known as mid-qual or mid-qual rate.

Retrieval Request Fee

Friday, September 30, 2011

A retrieval request happens when the cardholder’s bank asks for a readable copy of the transaction sales draft. Things like billing questions, fraud inquiries, POS mistakes and cardholder disputes are among a variety of reasons for a retrieval request.

MasterCard requires merchants keep their sales drafts in storage 180 days; Visa has a three-year requirement. It is advisable to keep these records seven years, however, for your business tax purposes.

There are ways to avoid retrievable requests. Whenever possible, obtain a card imprint and make sure the customer signs it. Check all the card’s security features and compare the signature on the card to the customer’s signature.

Advanced Fraud Controls

Thursday, September 29, 2011

More Details Coming Soon

Basic Fraud Controls

Monday, September 19, 2011

One of the first things a merchant can do to prevent credit card fraud is confirm the identity of the cardholder. When the card is present, this can easily be done by requesting a photo i.d. with a signature on it, such as a driver’s license or a government-issued card.

In situations when the card is not present, such as an over-the-phone or online transaction, there are two basic steps merchants should take to make sure the customer is legitimate: running an address verification (AVS) and obtaining the card’s verification code. 

Address verification is run through the payment gateway; it verifies the cardholder’s address through a series of steps.  The cardholder’s billing address is sent to the payment processor for verification, who then passes the address information to the issuing bank.  The bank matches the information with the address information they have on file for the card. Although this is a great system for preventing fraud, it is not perfect; it works only for United States addresses.

Card verification codes are the next line of defense for card-not-present transactions.  Visa refers to this code as a card verification value (CVV), Mastercard calls it a card validation code (CVC) and American Express and Discover call it card id (CID). The code is a three- or four-digit security code printed on the back of credit cards, typically at the end of the signature section.  The verification code program helps validate a genuine card is being used for the transaction and works similarly to address verification.

See also: Card Verification Value - Card Verification Code - Card Identification Number

Chargeback Fee

Monday, August 15, 2011

Chargebacks in general can be costly, sometimes costing the merchant to lose their merchant account (Chargeback Ratios).  Most providers will charge the merchant about $25.00 per chargeback.

A chargeback occurs when the consumer calls the issuing bank to request a refund.  Some chargebacks might be a mistake, Non Receipt of Information Chargebacks.  These should never happen - your customer should always know what company is charging their credit card: What Make a Good Receipt.

While you will read a lot of information on chargebacks, one thing to keep in mind - always fight a chargeback if you are in the right.  You have to respond to every chargeback, otherwise you might lose your merchant account and placed on the TMF list.

Customer Service Fee

Sunday, August 14, 2011

The customer service fee is a fixed fee charged by the card processor at the end of each monthly processing cycle.  The fee covers the any customer service the merchant may need.  It is usually a flat monthly fee that is charged to the merchant to help cover any extra costs outside the merchant account fees. 

The fee is sometimes useful to help keep the costs down with a merchant account processor.

The customer service fee can be anywhere from free to $20.00 monthly.

DDA Change Fee

Monday, June 20, 2011

A DDA (demand-deposit account, or merchant checking account) fee is charged when the merchant bank account is changed; the charge will usually take place before the change.  This fee is typically $15.00 - $25.00 and often will not appear on the monthly processing statement of the account.  Check with your bank to learn the exact fee structure before making the change.

Statement Fee

Thursday, May 19, 2011

The merchant statement fee is a fixed fee charged by the card processor at the end of each monthly processing cycle.  The fee covers the monthly statement and any customer service/support the merchant may need.  It is a flat monthly fee that is charged to cover the monthly mailing of merchant bankcard statements the merchant might need. 

Usually, the merchant account provider will provide free online access for the merchant to print their statements.  Even though most processors and card associations recommend differently, we recommend you keep a copy for seven to ten years. 

The statement fee can be anywhere from $0.00 to $20.00 monthly.

Discount Rate

Saturday, May 14, 2011

This fee is probably one of the most confusing terms in the merchant account industry.  When you hear the word discount, you think you might be getting something for less.  In a sense, you are.  Your income will be discounted - not by your choice.  This fee has a number of fees included, mainly the interchange rate, assessments, network charges, and merchant account provider fees.  Usually, the interchange rate is the largest fee, being paid to Visa / MasterCard / Discover Card / American Express.

There are basically two types of merchant accounts - retail and keyed (also known as card not present, e-commerce, Internet, Mail Order / Telephone Order (MOTO)).  Retail discount rates are cheaper because the risk of a chargeback is not as high as a keyed account.

Qualified Rate

This "qual" rate is the price that is usually listed on the agent's website.  A lot of times, you won't even see the other rates until you sign the contract.  Usually, this rate is what you will be charged on most transactions. 

Mid-Qualified Rate

Some providers have this "mid-qual" rate in their structure to help increase their income.  Usually, merchants won't even know they are being charged this rate until they review their statement.

Non-Qualified Rate

These transactions are downgraded to "non-qual" for different reasons.

• Extra charges from the card associations (rewards or business cards)
• The transaction was not completed in a timely manner - usually when you do a transaction, that money is guaranteed yours for a certain amount of days.  This is why most processors will automatically batch the transactions for you daily.
• If you have a retail account and you key in the transaction (the risk of a chargeback is higher)
• If you have an Internet account and you do not do Address Verification Service (AVS) (the risk of a chargeback is higher)

This structure makes is more profitable for the merchant account provider.  For example, if you have an e-commerce business and your customer does not live in the United States, you probably will be unable to do Address Verification Service (AVS) since this service relies on the house number and ZIP code.  Let's say your standard rate is 2.15%.  Your mid-qual rate is .5% and your non-qual rate is 1%.  Since AVS cannot be done, that transaction is 3.65%. 

Their is also a 6 tier structure as well that is offered by some providers due to a lawsuit brought by Wal-Mart.

Also known as Qualified Discount Rate.

With the fee, providers might have a three-tiered pricing structure: qualified, mid-qualified, non-qualified.

See also mid-qualified rate and non-qualified rate.

Customer Support Fee

Friday, April 15, 2011

The customer support fee is a fixed fee charged by the card processor.  The fee covers the any customer support the merchant may need.  It is usually a flat monthly fee that is charged to the merchant to help cover any extra costs outside the merchant account fees. 

The fee is sometimes useful to help keep the costs down with a merchant account processor.

The customer support fee can be anywhere from $0.00 to $500.00 a month.

Electronic Payment Gateway Set Up Fee

Saturday, March 26, 2011

This is the fee charged for the creation and setup of a new gateway account.  It is a one-time fee assessed by the gateway itself.  When setting up a new gateway contract, merchants should really read the fine print.  Some gateways do not disclose this fee outright but rather add it to the first monthly statement. 

This fee ranges from $0.00 to $1000.00.

NSF Charge

Friday, March 11, 2011

Credit card processors will charge a fee if a card is rejected, i.e., the amount of the charge was unable to be collected by the processor.  This fee is generally $25, but that does not include any fee your bank may charge. When this happens, merchant account providers typically will hold future batches until the money they are owed is collected; this can mean financial trouble down the line for the merchant, especially considering an electronic payment can be presented up to three times (unlike a paper check, which can only be presented twice) for collection.

Electronic Payment Gateway Fee

Saturday, March 05, 2011

An electronic gateway fee is a monthly fee which applies to merchants using an internet payment gateway.  It is usually billed by the gateway provider but it can sometimes be billed through the merchant account.  This fee can run anywhere from $10 to $100 per month. 

Additionally, there can be a per-transaction fee the gateway provider charges, on top of any fees charged by the merchant account provider.

Application Fee

Monday, February 28, 2011

This is a fee charged when the merchant applies for a new account.  Some providers charge a fee for the application, but will waive it or return it if / when the merchant account is approved.  The fee is sometimes used a preventative measure to stop merchants from signing up with multiple providers at the same time. 

Some merchant account providers will charge an application fee and offer the merchant a lower discount rate.

The fee can be free or it can be as high as $1000.00.

Qualified Discount Rate

Monday, February 21, 2011

This fee is probably one of the most confusing terms in the merchant account industry.  When you hear the word discount, you think you might be getting something for less.  In a sense, you are.  Your income will be discounted - not by your choice.  This fee has a number of fees included, mainly the interchange rate, assessments, network charges, and merchant account provider fees.  Usually, the interchange rate is the largest fee, being paid to Visa / MasterCard / Discover Card / American Express.

There are basically two types of merchant accounts - retail and keyed (also known as card not present, e-commerce, Internet, Mail Order / Telephone Order (MOTO)).  Retail discount rates are cheaper because the risk of a chargeback is not as high as a keyed account.

Qualified Rate

This "qual" rate is the price that is usually listed on the agent's website.  A lot of times, you won't even see the other rates until you sign the contract.  Usually, this rate is what you will be charged on most transactions. 

Mid-Qualified Rate

Some providers have this "mid-qual" rate in their structure to help increase their income.  Usually, merchants won't even know they are being charged this rate until they review their statement.

Non-Qualified Rate

These transactions are downgraded to "non-qual" for different reasons.

• Extra charges from the card associations (rewards or business cards)
• The transaction was not completed in a timely manner - usually when you do a transaction, that money is guaranteed yours for a certain amount of days.  This is why most processors will automatically batch the transactions for you daily.
• If you have a retail account and you key in the transaction (the risk of a chargeback is higher)
• If you have an Internet account and you do not do Address Verification Service (AVS) (the risk of a chargeback is higher)

This structure makes is more profitable for the merchant account provider.  For example, if you have an e-commerce business and your customer does not live in the United States, you probably will be unable to do Address Verification Service (AVS) since this service relies on the house number and ZIP code.  Let's say your standard rate is 2.15%.  Your mid-qual rate is .5% and your non-qual rate is 1%.  Since AVS cannot be done, that transaction is 3.65%. 

Their is also a 6 tier structure as well that is offered by some providers due to a lawsuit brought by Wal-Mart.

Also known just as Discount Rate.

See also mid-qualified rate and non-qualified rate.

Address Verification Service Fee

Tuesday, February 15, 2011

The fee is usually 5¢ to 10¢ per tranaction.  Some merchant account providers will not charge this fee.  The fee is usually done on Internet Merchant Accounts and Telephone / Mail Order  Merchant Accounts (MOTO).  It is the merchant's first line of defense to help Prevent Online Fraud.

If this feature is not done, the transaction can be downgraded to a non-qualified rate.  Usually, if the consumer's billing address is not in the United States, the feature cannot be done.  During the transaction process, the gateway will look at some numbers.  For example, the billing address is 1234 Main St, Anywhere, CO 80124.  The gateway will verify the 1234 and 80124.

Most gateways will also support recurring billing - storing the credit card information on their server.  If this is done, Address Verification Service (AVS) will not be done, since it was done on the original transaction.  If the credit card is updated for recurring billing, (AVS is done again.

Transaction Fee

Monday, February 14, 2011

This fee can actually be two-fold: a merchant can be charged a transaction fee from the merchant account provider and the electronic payment gateway.  Since this fee is a flat rate and not a percentage of the sale, this is where it can hurt some merchants - especially when the transaction is only a few dollars.

Internet Merchant Accounts

If your business is online (Internet Merchant Account) or Telephone / Mail Order Merchant Account (MOTO), you will need an electronic payment gateway.  Some electronic payment gateways might give you a certain number of free transactions and then charge the merchant anywhere from 5¢ - 50¢ per transaction.  Other electronic payment gateways (like the Quantum Payment Gateway), does not charge a transaction fee. 

When applying for a merchant account, the merchant needs to know what payment gateways are compatible with the provider.  Sometimes, when applying for an Internet Merchant Account, the merchant might need to sign another contract with the payment gateway provider.  Before signing the contracts, make sure to see what the transaction cost(s) will be.  The merchant account provider might charge you 25¢, the electronic payment gateway might charge you an additional 5¢ - 50¢ per transaction, and the merchant probably also be charged an Address Verification Service Fee (AVS) which usually is 5¢ - 10¢ per transaction.

This means that the merchant could potentially be charged anwhere from 35¢ to 85¢ on the transaction.  So on a $5.00 transaction, the merchant could be paying around 10% just on this fee alone.

Batch Fee

Wednesday, February 02, 2011

A batch fee is charged by the merchant account provider when a group of transactions is sent to the merchant account provider to be processed.  For a retail merchant account, this is usually done at the end of business.  For an Internet merchant account, this is usually done by the electronic payment gateway, once a day and can usually be set by the virtual terminal.

A merchant can close a set of transactions at any time, but if a merchant waits more than three business days after the sales transaction - the merchant account provider might downgrade some of those transactions to the non-qualified rate and the merchant risks losing the authorization.

Unlike the ACH fee, this fee is usually charged once a day - when the transactions are closed, even on the weekends.  So in a 30 day month with a 25¢ fee, the merchant will see a charge of $7.50.  In the United States, most merchants will not see this fee.  High risk merchants and merchants in other countries will usually see this fee.

By locating a merchant account provider that does not charge this fee, a merchant could save almost $100.00 a year!

ACH Fee

Saturday, January 29, 2011

When applying for a merchant account, you might see this fee (Automated Clearing House).  If you do see this fee, take your time your while completing the merchant account application.  Basically, every time the merchant account provider deposits funds into your checking account, they will charge you this fee.

Even if this fee is 25¢, that adds up.  For example, 20 business days in a month, this is $5.00 more a month that the merchant account provider is charging you.

Set Up Fee

Tuesday, December 14, 2010

This is a fee charged when the merchant applies for a new account or when the new account is set up.  Most providers will not charge a fee for new accounts; some charge it before starting the account and others add it to later billing statements.

The fee can be free or it can be as high as $1000.00.

See also Application Fee.

Monthly Minimum Fee

Friday, October 22, 2010

The monthly minimum fee is a way to make sure merchants pay a certain amount of fees each month; these fees cover the provider’s cost to keep the account going. If the merchant’s transaction percentage does not meet or go over the monthly minimum, they will be charged the monthly minimum to satisfy the fee requirements.

For example: If the merchant’s discount rate is 2.5% and the merchant sells $1,000 that month, the charge will be $25.00.  If the monthly minimum is $25.00, the merchant has met the requirement and will not be charged the fee.  If you only processed $500.00, you should be charged $12.50 to meet the monthly minimum.  Remember this does not include other fees, like transaction fees, batch fees, monthly customer support fee, monthly customer service fee, electronic payment gateway fee, etc.  This fee usually only applies to the discount rate.

Introduction to Merchant Account Fees

Wednesday, August 18, 2010