A downgrade simply means that you are being charged a rate increase because the type of card your customer is using has a higher processing cost or because a transaction was processed incorrectly by you, the merchant.
Whether you are currently accepting credit cards, or plan on doing so, it is important to know how to save money by avoiding downgrades whenever possible. You can’t always prevent downgrades from happening, but this section will show you what you can do to keep your transaction costs as low as possible.
As an example, for a Retail or “Swiped” Account where the customer is handing over their card for processing, a transaction will get the Qualified Discount Rate (lowest rate possible) only if the card is swiped, the cardholder is present, and the card is a standard consumer credit card. If any of these criteria are changed, the account will “downgrade” to either the “Mid” or “Non” qualified level. These levels are each associated with a greater cost of processing.
Here is a more detailed description of what can be done to avoid many downgrades, and also what happens if certain criteria are not met.
Retail/Card Swiped Accounts
Qualified Rate
The Qualified Discount Rate is charged when all of the following occur:
- Standard consumer credit card is used
- Card is swiped accurately and data properly obtained
- The customer’s signature is captured
- The transaction is “Batched” or “Settled” within 24 hours
Mid-Qualified
The Partial/Mid Qualified rate will be applied when any of the following occur:
- The card info is manually entered, or “keyed” & all AVS info is entered
- The consumer uses a Rewards card
- Transactions are not settled/batched within 24 hours
Non-Qualified
If any of the following situations occur, a Non-Qualified rate will be applied to the transaction.
- Card is manually entered with no AVS info entered
- The consumer uses a Corporate, Government or International card
- Authorization code is manually keyed in to your processing terminal.
- Transactions are not settled/batched within 48 hours
Keyed “MOTO” or Internet Accounts
For these types of accounts, the merchant manually enters credit card information into a credit card terminal or software after the order is placed or is collected through an online payment gateway.
Qualified Rate
The Qualified Discount Rate is charged when all of the following occur:
- Standard consumer credit cards are used
- All required Credit Card information is entered including AVS (address verification) for VISA® transactions.
- The transactions are “Batched” or “Settled” within 24 hours
- The order/invoice Number entered
Mid-Qualified
For MOTO/Internet Accounts, rates usually fall directly to Non-Qualified, not mid-qualify, but these are the possible reasons why a merchant may be charged a Mid-Qualified Rate
- AVS information is not entered
- Transaction/Batch is not settled within 24 hours
- Card is a Rewards or Business card
Non-Qualified
If any of the following situations occur, a Non-Qualified rate will be applied to the transaction.
- Any of the required card or transaction information is not entered
- The consumer uses a Corporate, Government or International card
- Authorization code is manually keyed in to your processing terminal.
Transactions are not settled/batched within 48 hours