How to Avoid Downgrades When Processing Customer Cards

How to Avoid Downgrades When Processing Customer Cards

The credit card processing industry is a never-ending love triangle between the customer, the merchant and the payment processor who handles the transaction. When a customer pays a merchant with a credit card or debit card, that merchant is charged a rate depending on a variety of factors, including how the card information is taken, and what kind of card it is.

If certain criteria aren’t met the transaction is downgraded, meaning that the merchant is being charged a higher rate to process the transaction. Mind you, different payment processors have different criteria for rating and downgrading transactions.

The best rate possible is called the Qualified Discount Rate. To get the Qualified Discount Rate in a retail environment, the customer has to be present, the card has to be swiped, the transaction must be settled within a timely fashion, and the cardholder’s signature must be captured. If any of these elements is missing the transaction will be downgraded to the Mid-Qualified Rate. If you’re a business owner, every downgrade is literally taking money out of your pocket: your livelihood and the well being of your business is dependent on limiting downgrades as much as possible.

There are several situations that will downgrade a transaction even further, from the Mid-Qualified Rate to what is called the Non-Qualified Rate. For a retail store, these criteria include: if card information is manually entered with no AVS code, the customer is not using a personal consumer card, the authorization code is manually entered, or the transaction is not settled within 48 hours.

With the proliferation of Internet services, Ecommerce has become a part of everyday life and a major revenue stream for merchants. Merchants who offer services over the Internet are held to different standards because they are not face-to-face with their customer and the customer’s card is not present or swiped when the transaction takes place.

To get the Qualified Rate for Internet accounts, the consumer must be using a standard credit card, they must enter all necessary information (including the AVS code), the transactions must be settled within 24 hours, and the order number must be included. If any of these criteria are missing the transaction will be downgraded to the Mid-Qualified Rate. If the AVS code or order number is missing, the transaction is downgraded.

If there is missing card or transaction information; the customer’s card is a corporate, government or International card; or if the merchant manually entered the authorization code; the transaction will be further downgraded to the Non-Qualified Rate.

Avoiding downgrades is essential to the success of your business. As a business owner you know that every cent counts, and that they add up very quickly. Follow these guidelines, have your transactions processed at the Qualified Discount Rate as much as possible, and keep your hard earned money in your pocket. Also, keep in mind that different payment processors have different criteria. Evaluate your situation and  look for a processor that will offer you the best rates for the bulk of your transactions.

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