What the Heck is a Qualified Rate for Processing?

One of the biggest questions people ask me is about how credit card processing pricing works. The cost is always one of the biggest things on a merchant's mind. The pricing for payment processing varies from company to company but it is always typically based on risk; the riskier your business model is and the method by which you are accepting transactions, you can expect to pay a higher rate.

The rates are broken down as follows:

1. Qualified Rate: This is the lowest rate that a merchant will pay when they accept a credit card. You can get a qualified rate when you physically accept and swipe the card to process the transaction (this is called card present). As you can see, this really only applies to businesses that have a physical location. If you are taking card numbers over the phone or through your website, you cannot get the qualified rate because those methods are considered more of a risk for fraud.

2. Mid-Qualified: Also called a partially qualified rate, this is the middle of the road of what you will pay and typically means that you are not physically swiping the customer's credit card into the terminal. The mid-qualified rate can be used if you have to key a credit card number into a terminal (instead of swipe) or if you have a website that uses a virtual terminal to process payments. This rate is the lowest rate an eCommerce store or telephone order operation can receive.

3. Non-Qualified: This basically means that you are not qualified to get the lower rates; this one is the highest. When people use special kinds of credit cards, like business credit cards or rewards cards, their transaction often will get charged the highest rate. In addition, if there is a situation where a card is acepted without the address verification being performed, that transaction will get the non-qualified rate. 

One of the misconceptions of the pricing is that your business will fall into only one of the three rates, but any of your transactions can fall into the above rates. Each and every transaction may not necessarily get the same rate. Just remember, if you have a brick and mortar business, it is likely that the majority of your transactions will get the qualified rate. If you have a web store, you will never get the qualified rate but most of your transactions will be mid-qualified. And anyone can have transactions in which the non-qualified rate is applied when customers use what is considered "special" types of cards.

I hope that helped clear things up a bit!