FYI/ADVICE: How Is Pricing Determined in Credit Card Processing?

Posted on February 17, 2010 by LCT Staff - Also by this author - About the author

TOMBALL, Texas — All too often I have potential clients ask the not so simple questions. “What is my rate?” There are many factors that determine rate in an ever changing and complex industry.

We have to consider whether a card is swiped or keyed; is it a corporate card or personal card, check card, reward card or regular credit card?; pin debit or signature debit; and do you have the CVV code on the back and the correct billing address for this card?

With more than 600 different types of cards and categories, it is difficult to give a simple answer. Most companies bucket the cards to what is commonly referred to as “qualified, mid-Qualified and non-qualified” transactions.

For example, your check cards and regular credit cards are considered qualified, providing that the cards are swiped through a credit card terminal and the magnetic strip is read. If you have to key these cards, they only will be considered mid-qualified if you get the address verification and the CVV code on the back. If you don’t, then these cards automatically downgrade to a non- qualified.

Typically, reward cards, even if they are swiped, are bucketed into mid-qualified transactions and corporate cards always will be considered non-qualified.

To make it even more complicated, there is special pricing for certain types of industries including government contracts. One such category is called GSA Large ticket. (These are Government Service Agreement Large tickets). Special software is required to get the special rate. The transportation industry may have government contracts where this software can be used, and in doing so, can save them a lot of money.

In addition, there are other fees associated with taking credit cards. Some companies charge monthly minimums, annual fees, non-PCI compliance fees, set up fees, etc. So how do you know what fees are justified? There is a hard cost associated with having a merchant account which includes an account fee and the processing company itself gets charged a non-activity fee if a client does not process. Some companies pass this on as a monthly minimum, some companies don’t.

Fees can include:

Authorization-- per transaction fee

IVR — Inter Active Voice Response fee (not common)

Voice Authorization — when you call in and get an authorization from the operator

AVS — Address Verification Service (helps get the mid rate when a keyed transaction)

Batch fees — When the transactions are batched and settled to bank

Retrieval fee — When consumers ask for a copy of transactions

Chargeback fee — When a merchant loses a dispute

Debit Access fee — Accessing pin debit networks

Insurance — for equipment that may be rented

Rental fee — for equipment you are using

Gateway fee — for online processing

Reporting fee — for online reporting

There are other fees that some companies charge, but these are the ones you will see the most of. If you don’t understand how this applies to you, simply ask your processing company.

How does all of this apply to the livery industry? Simple — know your customer and know the type of cards you are taking. Most of the transportation industry is never going to swipe a card because you integrate it into your reservation software. Some companies will use wireless terminals and we will talk about the pros and cons of that in our next article.

Source: Crystal Sulzer, managing partner of Ferrari Merchants in Tomball, Texas. She can be reached at (281) 598-2133 or at

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