Pricing is how a processor determines how a merchant will pay the credit card processing fees. In order to accept credit and debit cards, the merchant must pay. Depending on what your business does, how much you process, and many other factors, one pricing category may work better for your business than another in terms of less fees to pay.

While the card network sets the original fees, ISOs, issuing banks, and payment processors can add their own fees onto that base rate. In order to make sure that you are getting a good rate, check the most recent guides that Visa and MasterCard have released and compare them to your own.

Pricing rates can be categorized as tiered pricing, interchange plus pricing, and bundled pricing. Keep in mind that all of these rates may also come with an authorization fee per transaction.

Tiered Pricing

If your agent priced you under the tiered pricing category, then there are three groups of rates that you get charged depending on the type of card that your customer uses. These groups are the Qualified Rate, the Mid-Qualified Rate, and the Non-Qualified Rate. These can be further affected by the card brand, but most agents will price all brands the same way.

The Qualified Rate applies to credit cards that meet the definition of standard in the merchant’s industry and are considered as such by the payment processor. These are the lowest rates out of the tiered pricing model. Cards that are swiped are usually considered to be “qualified,” although there are ways for merchants that primarily do business online to process at the qualified rate.

The Mid-Qualified Rate is usually used for cards that are keyed in instead of swiped on the terminal. Additionally, if a customer is using a business card or a rewards card, the mid-qualified rate would also be used.

The Non-Qualified Rate is the generally the highest of the tiered pricing rates. The non-qualified rate could apply to cards that are keyed in and don’t require address verification or a business card where not all of the necessary data is captured during the transaction.

Interchange Plus Pricing

Interchange plus pricing is exactly what it sounds like: the interchange set by the card network, plus the markup. For example, if Visa sets an interchange price as 1.80%, and the payment processor’s markup is .035%, then the processor charges the merchant 1.80% + .035%. Sometimes the card brand affects the interchange plus pricing quoted to you by your merchant services agent.

Bundled Rate Pricing

Bundled rate pricing is the easiest to understand: one rate for all transactions. While this seems attractive, just be sure that this model is right for your business. Businesses that do benefit from bundled rates tend to have small tickets and do very little credit card processing.

Contact PayArc today to speak with our team about what pricing works best for you!

New Interchange Programs

In July 2020, Visa, Mastercard, American Express, and Discover are implementing new interchange programs.

‍Business Impacts

Merchant portfolios may need to be reviewed to prepare profitability models to support these new interchange programs.

Visa

Canada Region

Changes to Performance Tier 1 Fee Program for Visa Consumer Credit Transactions

• Performance Tier 1 will be renamed Performance
• Performance Tier 2 will be eliminated
• Performance Card-Not-Present will be introduced for consumer credit transactions

To qualify for Performance, retailers must have a minimum of $2 billion in total net VisaNet retail sales volume in Canada, a maximum fraud ratio of 0.07%, and a maximum chargeback ratio of 0.01%. This program applies only to electronic transactions.

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New Industry Fee Utilities Program for Visa Consumer Credit and Debit Transactions

Visa will implement new Canada Industry Fee Utilities interchange programs that apply to Visa consumer credit and debit transactions from eligible merchants. To be eligible, a merchant must meet maximum service fee levels and must have Utilities (UTL) enabled in the boarding system.

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New Emerging Segment Preferred Program for Visa Consumer Credit and Debit Transactions

Visa will implement the following Canada Emerging Segment fee programs that will apply to Visa consumer credit and debt transactions from eligible merchants. Eligible merchants include the following MCCs of any transaction amount:

• MCC 4900: Utilities
• MCC 6513: Real Estate agents and managers – Rentals
• MCC 9311: Tax payments
• MCC 8398: Charitable and Social Service Organizations

The following MCCs qualify if they transact amounts equal to or greater than CA$1000:

• MCC 8211: Elementary and secondary schools
• MCC 8220: Colleges, universities, professional schools, and junior colleges
• MCC 8351: Childcare services

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Changes to Domestic Interchange Fee Programs for Account Funding Transactions

Visa will implement new Canada domestic Account Funding interchange fee programs that will apply to select proprietary card products:

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US Region

Changes to Interchange Fee Programs for Visa Consumer Transactions

Visa will implement new interchange programs that will apply to purchase transactions from Visa consumer credit card products.

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Changes to the Supermarket Credit Performance Tiers

Visa will replace the Supermarket Performance Threshold fee descriptors, fee program indicators (FPI), and rates. The new structure will expand acceptance to include Visa Signature, Visa Signature Preferred, and Visa Infinite.

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Changes to Business Credit Interchange Fee Programs

Visa will support a new spend qualified tier interchange program for Business card transactions with a Product ID of G5 (Business Tier 5).

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Mastercard

Canada Region

Enhancements to Intracountry Interchange Programs

Mastercard is enhancing the Canada Domestic Interchange Programs by lifecycling the existing consumer credit programs and creating new ones. They are also restructuring the commercial programs by setting them up as Small Medium Enterprise, Large Market, and World Elite Business.

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New Mastercard Enterprise Solution Wholesale Travel Program Product Codes

Mastercard is expanding the Wholesale Travel Program by introducing 5 new commercial business-to-business (B2B) credit product codes and new commercial interchange programs in Interchange Rate Designators (IRD) BB.

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US Region

New Commercial Credit B2B Product Codes and Interchange Program

Mastercard is expanding the Variable Interchange Program (VIP) by adding three new commercial product codes which will be supported in three new VIP interchange programs. Separately, Mastercard is creating a dedicated product code (BPC—Bill Pay Commercial) and interchange program (IRD X5—Commercial Bill Pay Standard) specifically for consumer bill payments that use commercial cards.

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Revised Interchange Program and Rates for Assurance Framework

Mastercard is expanding the Merit 1 interchange program by introducing new consumer interchange programs that apply to Child Day Care Services (MCC 8351).

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Discover

US Region

New Micro Ticket Interchange Programs

Discover will implement new Micro Ticket U.S.Consumer Acquirer interchange programs that will apply to transactions that are less than or equal to $5.00 for either card present or CNP transactions.

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