f you’re a business owner, you’ve probably heard of the term “interchange downgrade.” Downgrades are not easy to understand, but they can end up costing you hundreds of dollars in credit card fees per month. While they’re not totally avoidable, it is possible to learn to recognize some of them and save money.
In tiered pricing, each credit card transaction falls into a pricing category: qualified, mid-qualified, and non-qualified. Qualified rates are the lowest, and you might think that most of your credit card transactions fall into the qualified category. Not so! Downgrades can occur for several reasons, including, but not limited to:
• Expired authorizations: if a transaction is not authorized within the allotted timeframe, the transaction will be downgraded and the merchant will be charged a higher rate.
• Expired authorizations: if a transaction is not authorized within the allotted timeframe, the transaction will be downgraded and the merchant will be charged a higher rate.
• Not capturing required data: Credit card transactions require a certain amount of data to be captured (learn more here). Some of the data includes:
o Date of transaction
o Transaction amount
o Merchant name
Failure to capture this data will result in a downgrade.
The best way to prevent downgrades is to make sure that you are processing using the “interchange plus” pricing model instead of the “tiered” pricing model. If that is not possible, other ways to prevent downgrades are to swipe or dip (in the case of EMV chipped cards) cards instead of keying them in to the system to make sure that all required information is captured, using AVS for e-commerce transactions to reduce the chance of fraud, and batching out everyday to make sure that none of your authorizations expire.
Contact Vulcan to speak with us about how to change your pricing model to interchange plus!
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