How Merchants Can Avoid a Non Qualified Fee

So since we talked about your merchant statement last time, let’s dive a little deeper into your merchant discount rate.  So to recap, your merchant discount rate is the base rate that you are charged by your Acquirer for any Electronic Consumer card you process.  But what does this really mean?

Electronic Consumer credit cards are defined as any basic credit card you process in a card present environment.  Card present means the customer is standing in front of you and you are able to either swipe or insert the card and obtain a signature or a PIN number.  And what’s a basic credit card?  Well, basically it’s the baseline card that Issuers offer with no perks, no bonus points, no concierge service, etc.  Remember the card you got during Frosh week in your first year of university?  That would be a basic card.

Non-Qualified Transactions Lead to Non-Qualified Fees

Any other type of card or transaction is considered as a Non Qualified transaction.  And this will result in a Non Qualified fee.  Here are the most common Non Qualified transactions:

Standard transactions

These are any transactions that are manually keyed in.  So if your POS goes down and you have to key in your transaction, these are considered as standard.  All ecommerce and telephone orders are standard transactions.  And, there is also a rule where if you do not deposit your batch within 3 days, all transactions in that batch will be downgraded to standard transactions.  So  be sure to deposit your batch every day!

Corporate cards

These can be identified with a company name embossed on the card.

Premium credit cards

These are any type of high end Visa or MasterCard like an Infinite Card or a high spend card.  Visa cards are easily identified as they will say Infinite on them.  MasterCard High Spend cards cannot be identified physically from the card as they look like basic consumer cards.  MasterCard has also recently released a World Elite card that is a premium card and this one can be identified with the name World Elite on it.

The reality is, premium credit cards take up at least 50% of all cards in market today.  So you can expect to be paying more than your merchant discount rate for a lot of the transactions you are processing.  And as a merchant, because of the “Accept all cards” rule issued by Visa and MasterCard, if you accept their product, you must accept all types cards.  The Competition Bureau is currently in a legal battle with these companies to have this rule removed.  But until they do, you are required to take every card that is presented.

Lower Your Non-Qualified Fees By Offering Customer Discounts

What you can do as an option to try and mitigate your fees is to offer discounts for customers who pay with different payment options.  So for example, you can offer a $5 discount on your next purchase if a customer chooses to pay with Interac or cash.  This could urge your customers to choose to pay for their purchases with a card that will cost you less to process.

Understanding your fees shouldn’t be difficult and it shouldn’t require a degree in astrophysics.  If you have any questions, call your Acquirer.  I cannot stress enough how it is your Acquirer’s responsibility to ensure that your statement is easy to read and to understand.  This is your right as a merchant.  Don’t let non-qualified fees sneak up on you.

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Matthew Hunt has been helping small businesses get set-up with Canadian Merchant Account Services since 2007 and helped 1000's do so. Join Matthew on Google+.

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