Online Processing Rates

Qualified, Mid-Qualified, Non-Qualified (aka: the good, the bad, the ugly)

One of the most important questions that a new business can ask when shopping around for online credit card processing is “What is my non-qualified discount rate?” The credit card industry is plagued with advertising qualified discount rate only. Unfortunately for most online businesses, that rate is useless.

Let’s quickly explain what qualifications are:
When a transaction is processed, Visa or MasterCard will indicate the qualification of that transaction. This is based on a number of factors, including the dollar amount, the type of credit card used, the fraud-prevention services used, but most importantly: how it was entered. In order to have a qualified transaction, you almost always have to swipe the card through a terminal, which provides “magnetic-stripe-data” with the transaction. If not, then the transaction is marked as “keyed” and almost never qualifies.

Why is this so important? Interchange fees (the % that Visa/MC and the issuing bank take on every transaction) are much higher for keyed transactions; therefore processors have higher discount rates for those transactions.

We get quite a bit of merchants coming to us with quotes from their competitors, saying that they were offered say a 3% qualified rate, with a small-font-clause saying +1% for mid/non-qualified. The salesman also tells them that they shouldn’t worry about that as most of their transactions will be qualified. Online businesses often learn the hard way that this is in fact just plain wrong.

STOP TALKING, SHOW ME STATISTICS!

A sample of one hundred random Helcim merchants was used for these statistics. Here are some important facts about this sample:

Qualifications of Online Transactions

Although there is nothing official about this sample, I believe that using real-world data helps giving a feel of what an everyday merchant will likely experience.

Another claim we often hear is that their transactions will be “targeted” to be qualified. Unfortunately for the merchant (or the salesman), the processor is not the one making the qualification/interchange decision.

Last but not least, merchants are sometimes convinced that using fraud prevention tools such as address verification service (AVS) and card verification value (CVV) will make most their transactions qualified. Once again, although the CVV can have impact on interchange, it often has little impact on the resulting qualification.

Address Verification Service (AVS) Usage

Card Verification Value (CVV) Usage

In conclusion, make sure that you are getting a good non-qualified rate for your online credit card processing service!

A quick note:
Transactions under $20 can often get qualified as Visa and MasterCard deem these low risk items. Unfortunately, transactions of this size apply only to a small minority of businesses accepting credit cards.