Why low cost debit card processing might not matter

The vast majority of businesses are offered a low QUALIFIED RATE, also known as a debit card rate, and then other rates kick in. This rate may be meaningless for your merchant account costs, especially if an ecommerce busines or if you have a high dollar ticket average.

To start your review, you need to know what types of cards are typically received in your operation. I call this credit card processing transparency. If you don’t know where you are, you can’t manage it. If your statement doesn’t break out what interchange categories you’re hitting, you need a new processor immediately.

Looking at your statement, what percent of your transactions hit your price plans lowest QUALIFIED RATE? What percentage of your revenues does that equal? I prefer the number of transactions as a key factor since a few unusually large or small dollar transactions could sku the importance of hitting qualified rates.   In a typical card present RETAIL operation, this number is probably in the 20% to 60% range. In that case, you need to focus on ways to reduce your debit card processing, including least cost routing.

But what if you have very little debit card usage? A lot of people won’t use their check card online. A lot of people like to use rewards cards, frequently 50-60% of transactions,  especially if higher dollar purchases. Businesses rarely use check cards.  Your focus should not be on the qualified rate, but on the overall effective rate. I don’t suggest just focusing on the rewards card rate because there are many of them and the most important aspect in controlling costs is the right pricing for all types of cards received.

Case in point:

An ecommerce apparel store has average ticket of $175.  Generally targeting a wealthier demographic, many of the shoppers are executives and business owners. What’s their percentage of transactions use debit cards? 19%. This merchant is on a wholesale price plan with cost plus, also known as interchange plus pricing. Merchants on a typical pricing plan with low cost qualified rate, frequently pay a .40% to 1.0% surcharge for non-qualified transactions, on top of whatever else may apply for the transaction. Confusing? Let me reverse the language. I could charge you a higher qualified rate and still cut your costs if you have a lot of non-debit cards.


1. Your merchant statement must have complete transparency. If you don’t see REWARDS, COMM CARD, CORP DATA RATE I,  and a bunch of other rate categories, call our hotline right now!

2. What percent of your transactions are debit and non-debit? If more non-debit, do you have a great price for that? If you don’t know, call now.

3. Look at your statements every month. As the economy changes, so does card type usage. What was valid last year  may not be this year.

4. If you have more than $100,000 in debit annually, I recommend you speak to a consultant about technologies that could help you reduce your effective rate.

Low cost debit card processing might not matter. You just need to know what to look for and how it impacts your costs.