Merchant Account Services

Merchant Accounts 101

Everything You Need to Know to About Merchant Accounts


Author: Jim Conners

Rating: 10.0

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One of the complexities in accepting credit cards is when a transaction does not qualify for the Qualified Rate. The rates and fees you pay can vary depending on not only the situation under which the transaction occurred, but the type of credit card plays a role as well. Some transactions, possibly through no fault of your own, may incur higher fees for various reasons. Why this happens can vary from provider-to-provider so we cannot provide you with a complete explanation. But you should learn enough below to ask the right questions and intelligently review and acquire a merchant account.


So what happens if your transactions do not qualify for the qualified rate? Most commonly they are charged a Non-Qualified surcharge. This is the highest rate you can pay for a Visa and MasterCard transaction. Basically, by not performing the actions required to make the transaction "qualify" you are increasing the potential risk and exposure for loss the processing bank and Visa and MasterCard may experience. By increasing their potential for loss and increasing their costs they essentially charge you extra to pay for it.

Some possible reasons a sale may be charged at a Non-Qualified rate include:

  • A credit card was not swiped through a magnetic stripe reader and AVS was not performed properly. Not supplying a zip code or street address will cause AVS to fail.
  • Not supplying all required fields for a corporate/business credit card. This may include the tax amount for the sale or an invoice number.
  • Delaying your batches until after 48 hours after a transaction is processed.
  • Acquiring an authorization and then performing a Force transaction to capture the sale.

If you see a lot of non-qualified transactions on your processing statements this usually is an indication that you are making errors while processing your transactions. You should call the customer service department of your merchant account provider to find out why your transactions are being charged this fee and find how how to correct it.

Partially Qualified (Mid-Qualified)

Unfortunately not all credit card sales qualify for the lowest rate possible. At the same time, they do not deserve to have the highest surcharges applied to them as it really is not the merchant's fault they did ot qualify. For these exceptions a "middle ground" surcharge is applied. The cost of this surcharge is usually around half of the Non-Qualified surcharge.

Some possible reasons a sale may be charged at a Partially Qualified rate include:

  • A credit card was not swiped through a magnetic stripe reader but AVS was performed properly.
  • A special credit card was processed that cannot qualify for a qualified rate. (See the section "Special Credit Cards" below).

In general this surcharge is only available to card present/retail merchants as all other business types are essentially being charged this fee as their Qualified Rate already.

Special Credit Cards

As we saw earlier in this article there are many different kinds of credit cards available to consumers to make purchases with. Some of these credit cards are considered special by Visa and MasterCard and incur higher, and even sometimes, lower fees. Typically the reason for this is the credit card offers extra benefits to its users and thus carry a higher cost to operate. Someone has to pay fr these extra costs and it is the merchants through higher fees.

How these credit card affect a merchant's fees will vary from provider to provider but it can happen in one of two ways:

  1. A surcharge is applied to the purchase

    The most common, and oldest, way to handle special credit cards is to apply a mid-qualified or non-qualified surcharge to special credit cards. Even if a merchant does everything that normally would allow a transaction to be charged a qualified rate, the special credit card automatically is charged a surcharge anyway to cover its extra costs.

  2. The credit card has its own special rates

    A newer way of handling special credit cards is to create special rates just for them. So instead of the merchant having a regular qualified rate only, they will know have a qualified rate and a rewards card rate. The rewards card rate will be different from their surcharges and only apply when they actually accept a rewards card.

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