Merchants that accept credit card payments can’t escape the interchange rate, which is a fee from card issuers for each transaction. However, these rates can vary. Many factors impact the interchange rate one is charged, including details about the cards, transaction types and channels, and even the POS terminal itself.
Card associations can also downgrade transactions, making them more expensive. Downgrades occur when transactions do not meet various technical requirements that ensure the lowest rates (such as industry type, card type, and payment channel).
Luckily, merchants can learn to manage their payments in ways that can minimize downgrades and help them qualify for better interchange rates. Let’s take a look at a few of the things a merchant can keep an eye on.
For CP (card present) transactions
- Always swipe or dip cards if you can.
- Make sure your equipment is updated and you staff closes out the terminal at the end of each day.
- If there is a settlement delay, your transactions can be downgraded.
- Ensure the authorization date matches the purchase date.
For CNP (card not present) transactions
- Always use Address Verification Services (AVS). When you utilize AVS, the customer’s billing address is compared against the cardholder’s address on file.
- Ship goods right away once the authorization settles.
- Settle the transactions within 7 days of the authorization date.
- Make sure you give your customer the shipping information, like the tracking and invoice numbers.
Merchants can also look into Level II or III processing. To qualify for this, a merchant will need to fall under a certain MCC code classification. In normal Level I processing, a merchant only collects standard data from the transaction, but under Level II and III processing, a merchant has the option to collect additional data for B2B transactions that reduce interchange costs. Level II collects the sales tax and customer code, while Level III will collect these items plus additional line item detail.
Qualifying for Level II and Level III processing can reduce interchange costs by 0.50%-0.80%, but there are some stipulations. Only commercial cards are eligible and, for Visa, tax-exempt transactions don’t qualify. MasterCard tax-exempt transactions qualify but require some additional steps.
Tips like these can be used by merchants to help them minimize downgrades and get better interchange rates. For more information on interchange rates, give our payment specialists a call at 866.290.5400.