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    4 Replies Latest reply on Apr 15, 2008 4:15 PM by nMoncrief

    MasterCard New Processing Rates April 2008

    amspcs Ranger
      For all of you businesses out there who process credit cards, you may be interested in knowing that
      revised Interchange rates effective April 2008 have been announced by MasterCard. 2008 Interchange schedule may be found at **--click on "Interchange Rates" in the business column. "Interchange" is, for all intents and purposes, the 'wholesale' price of credit card processing services which of course affects the rates at which processors re-sell these services to you, the Merchant. Visa will surely be following shortly with their revised 2008 rates. Feel free to post your questions and I'll try to answer.

        • Re: MasterCard New Processing Rates April 2008
          Carpeperdiem Newbie
          And I got a notice from my processor that business card transactions with $0.00 sales tax will be surcharged, FROM visa/mc --

          I don't get the logic. Most B2B transactions are usually tax-exempt. SO WHY is visa/mc surcharging us for B2B for tax-exempt transactions? My processor can't explain it. Anyone understand why the surcharges for B2B tax-exempt transactions?
            • Re: MasterCard New Processing Rates April 2008
              amspcs Ranger
              It really has nothing to do with the sales tax issue. Business/corporate cards have always been surcharged, which is to say they always downgraded to mid-qualified or non-qualified from the regular 'qualified' rate you were quoted when you signed up for your merchant account. The surcharge you are seeing now is because a new downgradable category of transaction has been defined, called "B to B". It all has to do with the risk associated with processing the transaction. Apparently, there is an increasd incidence of of dispute activity noticed with this kind of card which is easy to envision if you stop to think about it: A business order is placed to be charged on a b to b credit card, and when the company receives the bill, they can't quite figure out what individuial authorized the purchase, or something along those lines, so they dispute it.
                • Re: MasterCard New Processing Rates April 2008
                  Carpeperdiem Newbie
                  HOWEVER -- B2B transactions WITH sales tax are not kicked into the non-qual bucket. Visa/mc is using "sales tax" as the defining attribute of the transaction's risk. If the transaction HAS sales tax, it's a lower risk than tax-exempt. For me, mid-qual and "fully qualified" transactions are the same rate. This effectively doubles my transaction cost for B2B transactions that are tax-exempt.

                  visa/master have now exceeded AMEX in transaction costs -- I am encouraging my B2B customer to get a plum card.
                • Re: MasterCard New Processing Rates April 2008
                  nMoncrief Adventurer

                  I'm 99.99% positive that Amspcs is right about the sales tax being a non-issue as related to your processor's raising their rates. Follow with me, and I'll try my best to explain. When a request for a credit card authorization is made, the total amount of the charge, along with the card number, expiration date, address info, and CVV # are all submitted to your credit card issuing bank for the authorization, and later the authorization number is supplied to a second bank (called the acquiring bank) who converts the debt in cash for you. I simplified it, but that's it in a nutshell. Notice I didn't mention sales tax? The card issuing bank doesn't ask about tax because they don't care how much tax you're charging, only that their client can pay the total you are requesting.

                  As amspcs said, it all comes down to risk. All credit card transactions have a certain amount of risk associated with them. Risk varies based on many factors. For convenience, most credit card processors group all transactions into 3 or 4 tiers (categories). From lowest risk to highest, you have the following:
                  • Qualified Debit - this group includes debit cards processed without a PIN (like a credit card). Some processors don't recognize this group.
                  • Qualified Credit - this group includes all "ordinary" credit cards, not downgraded for any reason.
                  • Mid-Qual. Credit - this group normally includes all hand-keyed transactions and all rewards cards (where cardholder gets free gas, airmiles, etc.)
                  • Non-Qual. Credit - this group normally includes business, corporate, and gov't purchasing cards.
                  As you progress through these categories, the transactions have higher risks, so the discount rates increase. You and I (ie, normal, honest people) probably assume corporate card transactions would be safe and less costly. But corporate cards have a higher chargeback rate. We've all heard of the disgruntled employee who flies to Vegas and runs up a huge credit card bill before quitting his job. Believe it or not, those kinds of things actually happen, and they result in "corporate-sized" chargebacks. As business owners, we all pay the bill.

                  Carpeperdiem, some credit card processors are notorious for using V/MC's regular rate increases as an excuse to pad their own rates. For example, V/MC's interchange rates might go up by 4 or 5 basis points for a single, specific type of transaction, but a processor might choose to raise their rates for the entire category. (As long as there's a legitimate rate increase happening, some processors will use it to their advantage.) That's probably what happened to you. Your processor can identify your B2B customers just because they're paying with corporate cards. It sounds like they devised a complicated-sounding excuse to raise rates, and hoped you wouldn't question it.

                  Like amspcs, I'm happy to help if you have more questions. You can click my profile for contact information.

                  Neil Moncrief