Why are merchants charged different rates for different
types of credit cards?
If you are like many other small business owners, you
probably don't know everything you need to know about your
merchant account and how your Merchant Services Provider,
card issuing banks, Visa and MasterCard classify your
transactions.
There are several factors that can affect how much you
are charged for processing a certain credit card. They could
range from something simple like not entering a (correct)
billing address for the card, or something more complicated
like rewards credit cards and corporate purchasing credit
cards. There are over 200 types of different credit cards
bearing Visa or MasterCard logos on them and it is virtually
impossible to keep up with all of them.
The card issuing banks create numerous programs to
attract consumers to use their credit cards. Cardholders can
get airline miles, cash back and other perks by using their
rewards Visa and MasterCard credit cards. But you, the
merchant, in most cases are paying for part of those
"benefits" that the cardholder is receiving by paying a
higher rate for accepting that card. But there is not much
we can do about this, so let's just leave it at that.
We all know that if we start choosing which cards we
accept and which we don't, we may end up losing
significantly more in sales than we would ever save on
processing rates. The only thing left to do is follow the
rules Visa and MasterCard put in place and try to avoid
being charged the extra fees. A lot of times those rules and
regulations seem unfair and sometimes just plain ridiculous,
but if you want to stay in business and accept those cards,
you'll just have to deal with it. I'll give you an example
of one of Visa's ridiculous (in my opinion) regulations that
states that a transaction receipt must "communicate a refund
policy in letters approximately 0.25 inches high". Try
remembering the very last time you signed a transaction
receipt where the refund policy was printed in letters
this big.
When it comes to corporate credit cards, card issuing
banks claim that they carry a higher risk (of fraud I
assume) and therefore the merchant should pay extra to
accept them. Doesn't make a whole lot of sense, does it? If
anything, I think personal credit cards are used a lot more
online and offline and have a higher chance of being
compromised, but that's just my opinion. Here is another
Visa rule. All transactions posted to corporate credit cards
should have a tax amount between 1% and x%. Yes, it starts
at 1% and not 0%. If you are not charging your corporate
clients tax, you will pay extra fees. Does this make sense?
Absolutely not. But once again, there is not much we can do
about any of this.
At LimoMerchant.com we spent months researching how card
industry works and looking for ways to help you save. Let us
look through your merchant statements and see what we can do
to save you some money. |
