MasterCard interchange rates and criteria update April 2012

MasterCard updated their merchant interchange rates and fees portion of their web site. It’s a useful for all merchants. The missing link to all this data however  is a clear identification of which transactions are qualified and which ones are not.  For example, if a merchant is on Interchange plus pricing, it lists all the interchange rates the merchant paid. But it doesn’t indicate which ones are qualified and which ones downgraded to a higher rate. Some processors provide this information, with a section call ‘non-qualified’ transactions, however, the software frequently shows transactions as non-qualified that truly are the best qualified rate that a merchant can receive.

As a merchant I would want to know which rates are the best possible for a given card type at a glance. Why should a merchant have to hunt through hundreds of pages to figure it out? Interchange is not getting less complicated. Our team offers merchants an automated solution to qualify transactions for the best interchanges rates. Contact us for details.

3D Merchant maintains a list and links of all official interchange rates here.

Verifone Omni 3740 and Omni 3750 end of life 2012. What should you replace a multi-merchant terminal with?

The Omni 3750 is a multi-merchant capable machine, often used by businesses that had one account for retail and one for MOTO. Before jumping into the next dial up or even IP multimerchant terminal, it’s time to review the related credit card processing landscape. The primary purpose of separate retail and MOTO merchant accounts has been to help larger merchants qualify for lower interchange levels for each type of transaction. This method has historically been particularly important for wholesale suppliers in the construction industry that have a storefront, plus a base of commercial accounts, most of whom do not pay at the store. Without two merchant accounts, the cost of card not present transactions cost up to 1.05% extra on a retail account.

INTERCHANGE QUALIFICATION CHALLENGE: Proper presentment of transactions regardless of method of entry (key entered or swipe) or card type (different requirements for data to submit). Proper presentment is getting more complex as regulations are changing more rapidly in the past and the card networks & card issuing banks are creating new rules making it harder to qualify for the best rate for any given card type. For example, our internal spring bulletin explaining fee changes was 32 pages long versus a more typical 2-3 pages.

ADDITIONAL CONCERN: New Fixed Acquirer Network Fee (FANF). Visa’s Card Present Fee is fixed based on the number of locations. For Card Not Present (CNP), the fee is based on monthly sales volume, and is much higher than card present. Each merchant account is counted as a location. EMV (contactless) is mandated for all merchants by 2015; Visa is offering incentives to merchants who implement beginning in the 3rd quarter of 2012.

ANALYSIS: It is my firm belief that it will be impossible for merchants as described above to continue to qualify for the best interchange rates with standard dial up terminals because of the continual need to identify needs, update programming and train employees. A manual process just won’t work. As an interchange expert, even I can’t keep up with the rules to manually oversee merchant accounts without an automated system.  A host based solution is the only viable long term solution for merchants who want to control fees.


If you want to stick with a multi-merchant terminal:

  • FD300 TI (PCI) Dual Com, First Data only, $499
  • FD300 Wifi (PCI), First Data only, $695
  • Other brands may be available, check manufacturer web sites for current models.

For a host based solution:

  • CenPOS virtual terminal with automated switching. With a single merchant account, CenPOS will identify the card issuing bank, requirements needed to qualify you for the lowest interchange for that card, and automatically present properly as retail or card present with all the right data. Benefits:
  1. Interchange optimized, employee mistakes eliminated
  2. Single merchant account- potentially reduce statement fees, regulatory fees, PCI compliance fees, and higher CNP FANF fees
  3. Always current with latest federal and state regulations


Limitations:  As of this writing, EMV is not yet approved on CenPOS, but is anticipated by July 1 when Visa’s incentives begin; hardware manufactures are still working out reliability issues with some new models.  In the interim, merchants may wish to use inexpensive secure card readers for low transaction environments, or older model signature capture units that will have to be replaced at a later date.
magtek card reader



Terminal that selects the best rate for interchange fees- interchange and level 2 data review

Merchants must understand interchange in order to understand why credit card processing fees can vary with the same bank issued card from one transaction to the next.  The cardholders financial institution remits to the merchant financial institution (merchant processor) the transaction amount, less the interchange rate. The interchange rate may be a directly negotiated rate between the bank and the processor or it may be a default rate set by Visa, Discover or MasterCard.

When the rate is created, there are stipulations or criteria to qualify for the rates. For example, the rate applies if x, y, and z are present. But if only x and y are present charge a higher rate. If only x is present, charge even more. Here’s where merchant confusion comes in. How does a merchant know what is needed? How do they know if they qualified for the lowest rate or a higher rate? It is possible to train cashiers or order processors? Of course not!

Many merchants have been trained to make sure that level 2 data is supported, which is pretty universal today. Unfortunately, they’ve been lulled into believing this is the fix-all for getting better rates. How come so many transactions don’t qualify for commercial data rate 2?  Instead, merchants hit one of the others illustrated below, commercial standard or commercial data rate 1. interchange rate table commercial card

This is a single excerpt of many, many pages related to commercial credit card processing. Merchants need to know there are multiple rules for all types of credit and debit card transactions, not just commercial cards.

What is enhanced data required?  It depends on the card issuer and the card brand. For example, Visa commercial cards for travel & entertainment (T&E) have different requirements than other commercial cards. Do you understand why ” supporting level 2 data” is not enough? 

What terminal will give you the best rate? It’s virtually impossible for a merchant to qualify for the best interchange without a system- what individual has access to all the rules, could keep up with the changes, and could train all employees to do the right thing to qualify your transactions?

  1. Your payment solution must dynamically identify the card issuing bank, also known as bin management. Anything else is just not realistic because you can’t depend on employees to become payment processing experts.
  2. The solution then must intelligently require the data needed to qualify for the best rate AND pass that data through.  Incredibly, there are solutions that capture data, but do not pass it through. There are even some solutions that capture the data, but then submit their own fake data because they don’t trust your employees to not make mistakes. If you’re particularly adept at reading merchant statements, you can be lulled into believing you have great interchange qualification, however, your company is at great risk of getting caught for violating presentment rules.
  3. Your processor must support the receipt of the data. Not all processors can!

Rates and requirements are completely unknown to merchant employees who process transactions (cashiers) and the most educated financial staff. CenPOS proprietary technology is a private cloud, SaaS payment processing platform that AUTOMATICALLY optimizes transactions to QUALIFY for the BEST rates, saving you up to 1.05% per transaction by avoiding downgrades to non-qualified rates.

Click here to become a CenPOS referral partner.  Click here to become a customer through authorized reseller 3D Merchant services, or call the hotline at the top of this web page.

Debit Fees Interchange Regulation Video- Will you get new Rates?

Which merchants will receive the new low debit fee rates? This video provides a detailed look at rate differences and how to examine your merchant agreement schedule A and statement. While all merchants qualify for them, only a fraction will actually have debit discounts passed down from their processor. Will you be one of them? Pull out your merchant statement, then watch the video so you can compare data.

On October 1, 2011, new debit interchange rates go into effect as a result of the Durbin Amendment, part of the Dodd-Frank Wall Street Reform Act.

Federal Reserve issues standards for debit card interchange fees

The Federal Reserve Board on Wednesday issued a final rule establishing standards for debit card interchange fees and prohibiting network exclusivity arrangements and routing restrictions. This rule, Regulation II (Debit Card Interchange Fees and Routing), is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Debit card interchange fees are established by payment card networks and ultimately paid by merchants to debit card issuers for each electronic debit transaction. As required by the statute, the final rule establishes standards for assessing whether debit card interchange fees received by debit card issuers are reasonable and proportional to the costs incurred by issuers for electronic debit transactions. Under the final rule, the maximum permissible interchange fee that an issuer may receive for an electronic debit transaction will be the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction. This provision regarding debit card interchange fees is effective on October 1, 2011.

The Board also approved on Wednesday an interim final rule that allows for an upward adjustment of no more than 1 cent to an issuer’s debit card interchange fee if the issuer develops and implements policies and procedures reasonably designed to achieve the fraud-prevention standards set out in the interim final rule. If an issuer meets these standards and wishes to receive the adjustment, it must certify its eligibility to receive the adjustment to the payment card networks in which it participates. Comments on the interim final rule are due by September 30, 2011. The fraud-prevention adjustment is effective on October 1, 2011, concurrent with the debit card interchange fee limits. The Board will re-evaluate this adjustment in light of feedback received during this comment period.

When combined with the maximum permissible interchange fee under the interchange fee standards, a covered issuer eligible for the fraud-prevention adjustment could receive an interchange fee of up to approximately 24 cents for the average debit card transaction, which is valued at $38.

In accordance with the statute, issuers that, together with their affiliates, have assets of less than $10 billion are exempt from the debit card interchange fee standards. To assist payment card networks in determining which of the issuers are subject to the debit card interchange fee standards, the Board plans to publish by mid-July and annually thereafter lists of institutions that are above and below the small issuer exemption asset threshold. Also, the Board plans to annually survey the networks and publish a list of the average interchange transaction fees each network provides to its covered and exempt issuers. This information should enable issuers, including small issuers, to more readily compare the interchange revenue they would receive from each network.

The final rule prohibits all issuers and networks from restricting the number of networks over which electronic debit transactions may be processed to less than two unaffiliated networks. The effective date for the network exclusivity prohibition is April 1, 2012, with respect to issuers, and October 1, 2011, with respect to payment card networks. Issuers of certain health-related and other benefit cards and general-use prepaid cards have a delayed effective date of April 1, 2013, or later in certain circumstances.

Issuers and networks are also prohibited from inhibiting a merchant’s ability to direct the routing of the electronic debit transaction over any network that the issuer has enabled to process them. The merchant routing provisions are effective on October 1, 2011.

The Board’s notices for the final rule and the interim final rule that will be published in the Federal Register are attached.