Member Benefit News

Understanding Credit Card Acceptance Costs

While it takes only seconds to get approval on a credit or debit card purchase today, a number of organizations have a hand in making that electronic transaction possible. Your merchant processor, card associations such as Visa® and MasterCard®, and the bank that issued your customer's card all have a hand in completing the transaction cycle. The cost you incur to accept credit cards include the various fees charged by each of these parties to facilitate the transaction. Because these fees are taken directly from each transaction, discounting the total amount of income you receive from that transaction, your processing rate is often referred to as your "discount rate."

Interchange rates vary depending on the type of card presented, how it is processed and the type of merchant accepting the credit card. Typically the card associations review their interchange fee structures twice a year, and may make adjustments to their fees during their review. Usually, when associations adjust their fees, your merchant acquirer must also make adjustments to your discount rate to cover the difference in fees.

Interchange regulations and rates are complex and vary by industry. While no card accepting merchant can avoid paying interchange fees, there are a number of steps you can take to manage your card processing costs by avoiding "downgraded" transactions.

1. Whenever possible, swipe the customer's card rather than key-entering the data. Transactions in which a card is swiped through a terminal receive the lowest transaction rate.
2. For card-not-present transactions, enter the additional address verification information (AVS) when prompted. This additional security feature helps prevent fraud. If not entered when requested, your transaction will downgrade and incur higher processing charges.
3. Batch out daily - To qualify for the lowest processing rate available for each transaction you've processed, you must submit your transactions for settlement within 24 hours.
4. Accept PIN-based debit. The rates paid for PIN-based debit are typically lower than credit, especially if your average ticket is higher than $35.

This information is brought to you by Elavon. Feel free to call Kimberly Layton with any questions or for more information on the credit card processing program at 1-866-638-8614. Your success is their goal!

Reprinted from SQE Professional, April 2010