The fees are assessed according to the type of credit card that is accepted. While there is no way to discern which card is being presented, it will help to know why the rates vary on your credit card statement.
The Different Kinds
Generally, there are six types of VISA and MasterCard credit cards which customers will present: debit cards, check cards, qualified cards, mid-qualified cards, and non-qualified cards. Debit cards are also known as ATM cards. As you may know, it is the card that is issued in association with a checking account.
Protecting the Customer
A four-digit number known as a PIN (personal identification number) is assigned to the owner of the card. Whenever the owner presents the card for payment, he/she enters the PIN number into the terminal. This protects the owner from identity theft, as no one but the owner can use the card. When the PIN number is entered, the retailer incurs the debit card rate on the transaction.
The Lowest Fee
If the owner does not enter the PIN number, then the retailer incurs the check card rate. The check card rate is higher than the debit card rate, because the PIN number is not used. Ken Paterson of Mercator Advisory Group says in the June 2007 issue of Entrepreneur.com that “merchants who have PIN technology in place can lower their costs simply by telling customers that they prefer they pay using their PIN.”
The Most Common Type
Most VISA and Master Cards presented for payment are ordinary credit cards, meaning there are no discounts, nor rewards associated with them. Their rate is the lowest of all credit cards presented for payment. All retailers doing business in the United States will receive these cards for payment of merchandise.
Discounts for the Customer
Mid-qualified cards, conversely, are VISA or Master Cards with rewards or frequent flyer miles associated with them. As the customer uses theses cards, they accumulate special rewards or free miles which can be applied toward future airplane trips. The retailer pays for these rewards or frequent flyer miles. Therefore, the rate for processing these cards is higher than the qualified rate.
The Highest Fee
If the VISA or Master Card is a business credit card or government credit card, it is considered a non-qualified card. A VISA or Master Card which is not swiped through the credit card terminal is also charged as a non-qualified card. Generally, the non-qualified cards are the most risky to accept. There is a risk that the business owner may have declining sales making it impossible to collect payments incurred on the card.
Absent Customers
If the card is not swiped, the card owner is not present at the time of the transaction. The retailer takes the information by telephone or through a mail order. He/she then calls the credit card number into the credit card company for verification that the transaction can be made. Because of the risk involved in stealing the credit card numbers, the non-qualified rate is the highest rate assessed on credit cards.
In conclusion, there are six types of rates assessed on credit cards and a proper understanding of how these fees are determined will help the retailer understand his credit card statement and also help him to avoid unnecessary charges.
Gail Cavanaugh - Gail Cavanaugh is the owner of Gail Cavanaugh's Business Solutions, a company providing merchant services, website design, and marketing ...
