Finally, we leave the best till last. Imagine
you see a company offering credit card processing rates as
low as 1.18%. You sign the contract expecting you got the
bargain of the century. In no time, you notice that this processing
rate never seems to apply to you. Why?
simple. They manipulate their rate structure so published
rates will not apply. In this case "Creative Processing"
doesn't work to your advantage. Many of these rates, i.e.
1.18% are below even their costs. Here’s what happens...
Credit Card Processing rate structures are divided
into different qualification categories, also known as “Bins”
or “Tiers.” Typically, you should expect a three
tier processing structure which will represent different card
These are typically “standard” charges
as defined by the Merchant Provider. These are normally the
lowest rate a merchant will be charged for credit card processing.
You can expect all major credit cards will fall into this
This rate category is assigned based on how
the majority of cards will be processed, i.e. swiped cards,
vs. non-swiped. Swiped cards are processed at the absolute
lowest rate because the merchant sees and swipes the physical
card through an appropriate terminal which limits the potential
for a fraudulent charge. MOTO (Mail Order/Telephone Order),
internet transactions, including mobile phone processing are
not considered “Swiped” and are charged at higher
“card not present” values.
Your “Qualified” rate may differ
depending on the types of transactions you process.
“Mid-Qualified” rates apply when
the default rate criteria isn’t met. This may be because
a retailer who normally “Swipes” cards processed
the request without the physical swipe. Other types of card
transactions routinely fall into this category including rewards
or business cards. (ONLY REWARDS CARDS, MILEAGE CARDS ETC . BUSINESS CARDS GO TO NON QUALIFIED BIN)
Some transactions, such as reward cards, can
be upwards of 40% of the total number of transactions, so
you’ll want to pay close attention to this tier. To
complicate matters, a transaction can be considered Qualified
and Mid-Qualified. For example, if your Qualified rate is
1.5% and your Mid-Qualified is 1% you could be processed at
a rate of 2.5%.
For practical purposes, the Mid-Qualified rates
exist to offset increased interchange costs. Rewards cards,
for example, require a higher interchange cost to validate.
The abuse of this tier is often responsible for questionable
Non-Qualified rates are the highest percentage rates charged
to a merchant for a transaction. This category applies when
the transaction doesn’t fall into either the Qualified,
or Mid-Qualified tiers.
Examples of Non-Qualified rates may include:
- A card keyed into a terminal instead of
- Business Cards are used and not all the
required fields are entered.
- As a merchant, you don’t settle your
batch in a timely manner.
The credit card processing company will quote and list an extremely low transaction rate. In order to honor this quoted rate, the provider will allow one particular type of transaction (i.e. a Visa Debit Card) to use the Qualified Tier, and send other normally standard transactions into the Mid or Non-Qualified Bins. By altering the Bin and Tier structure, a Merchant Service Provider can increase his profits, at your expense. Too many vendors discover this deception only after they have signed a 3-year contract, with early termination fees. Be wary of any merchant who is offering a transaction rate that seems to be too good to be true, because it probably is.
For more information about
1st National Processing, Mobile Solutions, Merchant Accounts,
Credit Card Machines, Supplies, and Gift Card Programs, please
visit our website at http://www.1nbcard.com,
or give us call toll free to talk to an account