Merchant Account – Credit Card Processing

Downgrade fees can cost you a lot of money		Educating you about how to process credit cards is an important service.
Whenever you don't process a credit card in the manner that it was intended to be processed, your transaction will downgrade. A transaction downgrade means higher fees for you. A transaction downgrade means you will not pay the discount rate but a rather high non-qualified transaction rate. This can cost you hundreds if if you lots of volume, even thousands of dollars per month if you are doing it unintentionally and unaware. Example: You take a credit card number you obtained through an Internet shopping cart and instead of letting the shopping cart process the transaction automatically via the gateway, you key the transaction into a card swipe terminal instead. Unfortunately, this is a very common practice and often encouraged by some merchant services providers to the unsuspecting merchant. Companies think they are saving money by not getting a second merchant account or because the discount rate on an Internet merchant account perhaps appears to be higher than on their card swipe terminal. However, they are looking at the "discount" rate. When you key a transaction into a terminal that is designed to take a card by swiping it, the transaction downgrades and you pay the non-qualified rate instead, which is often over 2% higher than the standard discount rate. There are lots of other examples where a transaction can also downgrade. Processing Internet Transactions on a Retail Terminal Downgrade fees The advantages of retail credit card acceptance or rather card -in-hand, card swipe applications is lower rates. This is because if you have the card in-hand and the customer has swiped the credit card, the risk the transaction is fraudulent is lower than many other transactions. These lower fraud risk is passed onto you the merchant as savings by the credit card agencies. However, we have seen many merchants who also have a web presence believe that using this same account to process off-line credit and debit cards using the keypad on the terminal they will save money over getting a separate ecommerce merchant account. There could be nothing further from the truth. This is because when you use the keypad of your processing terminal, your transaction will "downgrade" which essentially means that the risk goes up and thus so does your rate when you see this transaction on your processing statement. This same transaction may be 100% conforming an an Internet transaction and thus receive the discount rate which may in fact be lower than the non-conforming Retail rate. Always process a credit card the way the credit card company expects to be processed.		Whenever you process a credit card different than your merchant bank intended, you will pay higher rates.