Basic Accounting

The primary costs to a merchant of merchant accounts are discount rate and transactions fees. The merchant account provider has a lot of latitude in the pricing structure.

Three tier pricing is one of the most common pricing schemes. Using 3 tiers pricing, the merchant account provider groups the transactions into 3 groups (tiers) and assigns a rate to each tier. The three tiers are qualified, mid-qualified and non-qualified rates.

1. A qualified rate is the lowest tier. It is what a merchant is charged when processing a consumer credit card in a way that has been defined as standard by the merchant account provider. The qualified rates is what is usually quoted by merchant account salespeople. A mid-qualified rate is what the merchant is charged if processing a transaction outside of standard parameters. A mid-qualified rate may apply to rewards or corporate cards, which can comprise up to 40% of the cards used for purchases. The merchant, of course, has no control over what card a consumer uses.

2 Mid-qualified rates may apply if a merchant keys the credit card number into a terminal rather than swiping a card. Merchants have more control over this. A mid-qualified rate can be priced 100-200 basis points higher than a qualified rate. This is far higher than the interchange fee (cost basis for the merchant account provider) which applies to different types of transactions. Naturally this is a big profit center for merchant account providers.

3. A non-qualified rate is the highest percentage rate a merchant will be charged whenever they accept a credit card. A common reason for non-qualified transaction is not providing all pertinent information on a transaction. Non-qualified transaction fees may also be assessed if a merchant doesn’t settle batches within a specified amount of time.

Non-qualified rates can cost merchant 150-300 basis points more for the transaction. Another excellent profit stream for merchant account providers. And one that is frequently hidden from the merchant

T Brandon is an expert in the payment processing industry and has over 15 years experience. Specialties include high volume and high risk merchant account processing as well as EFT , ACH, and Mobile Payments.

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If your unpaid overdrafts and credit card payments leave you no room for cereal at the breakfast table, it's time to apply for an unsecured loan if you don't possess property.