Interchange downgrades and the associated higher rates are something that all merchants want to avoid. Major credit card organizations, such as Visa, Discover Card and MasterCard, maintain Interchange Downgrade rates for both credit card and debit card transactions that fail to meet the requirements for the transaction to clear at the card’s correct Interchange Rate. Interchange Rates that are downgraded are higher than the normal Interchange fee. Below explains two common credit card processing Interchange Downgrades and how to avoid them.
Electronic Interchange Reimbursement Fee (EIRF)
The EIRF is a common surcharge that can either be avoided or minimized. This rate is usually applied to transactions that lack proof of compliance or that are not settled within 2 days of the authorization. For example, retail, restaurant and supermarket EIRF occurs if the transaction was voice approved and the batch was closed 72 hours after authorization. Mail or telephone orders through e-commerce merchant accounts will be subject to EIRF if the batch isn’t closed daily or if sales tax isn’t applied to a commercial card. Lodging EIRF will occur if the folio number or check in/check out dates are missing.
EIRF can be avoided through settling batches every night. Transactions that take longer than 48 hours to settle will often default to EIRF. Always enter sales tax as a separate field for commercial card transactions. Ensure a smooth AVS verification through accurately entering the address and CW2 codes. If the transaction amount changes, request a new authorization code to avoid having the final charge mismatching the original authorization. Finally, always avoid keying in a card and forcing verification.
Standard Fees
Standard credit card processing fees are similar to EIRF with regards to missing certain data elements. They are also similar to EIRF in that they are applied to both card present and card not present debit, credit and prepaid card transactions. However, the fee generally applies to any card transaction that is not settled within 3 days after the authorization. In addition to this, Standard is applied to card transactions that are settled or paper processed transactions.
In conclusion, merchant accounts can be successfully managed through clearing transactions at the correct Interchange in a timely manner. This will avoid EIRF and Standard fees and ensure that the merchant maintains a low processing cost.