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Discount Rates

The purpose of this page is to give you a better understanding of merchant account discount rates in general – and why you pay a higher rate (downgrades) on certain transactions.

If you have a question about discount rates or credit card processing that is not covered on this page, call 888-383-8056 (sales/support).
A discount rate is a percentage of the total transaction amount which the processor charges the merchant to process the credit card transaction.

The percentage varies (qualified, mid, and non qualified) and is influenced by numerous factors such as how the card is processed and the type of card. When a transaction falls into one of these higher rate categories, the transaction is considered downgraded.

Swiped Transactions

A transaction is swiped when a merchant slides a credit card through a terminal or card reader and the cardholder information is electronically captured from the magnetic stripe on the back of the card. Restaurants, gas stations, and beauty salons are examples of businesses that swipe credit cards.

Risk is the primary factor in determining the discount rate paid on a specific transaction – so merchants that “swipe” credit cards generally qualify for a lower rate than merchants that key transactions (see below for an explanation of what a “keyed” transaction is). When a merchant swipes a card they should also be checking the signature and ID of the cardholder which also helps reduce the risk of fraud. The possibility of chargebacks or disputed transactions is greatly reduced as well on swiped transactions, since the customer can actually see and feel the product when buying vs. just relying on a description or picture on a website.

Swiped Qualified Rate:

  • swiped qualified rates can range from 1.70%-1.99%
  • standard personal credit card
  • must be swiped
  • transaction batched/settled within 24 hrs

Swiped Mid-Qualified Rate:

  • mid qualified downgrades range from 1%-1.5% and are added to the qualified rate. (ex. if your qualified rate is 1.80% and your mid qualified rate is 1.25% your total rate would be 3.05%)
  • card is manually entered or “keyed” with billing address (AVS)
  • personal rewards cards

Swiped Non-Qualified Rate:

  • Swiped Non-Qualified Rate:
  • non qualified downgrades can range from 1.50%-1.99% and are added to the qualified rate. (ex. If your qualified rate is 1.80% and the non qualified rate is 1.90% your total rate is 3.70%
  • card is manually entered or “keyed” without billing address (AVS)
  • card type is government, international or business.
  • authorization code is manually keyed (forced Authorization)
  • transactions not batched/settled within 24 hrs

Keyed Transactions

A transaction is keyed when a merchant manually enters a transaction by using the keypad on a terminal, pos software, phone, or an online payment gateway. Internet, mail, and phone merchants are examples of merchants that key transactions.

Since the majority of “keyed” transactions are processed with the card not being present at point of sale, merchants pay a higher discount rate to offset the higher risk associated with these types of transactions.

Keyed Qualified Rate:

  • keyed qualified rates can range from 2.20%-2.50%.
  • standard personal credit card
  • billing address provided for address verification (AVS)
  • transactions are batched/settled within 24 hrs

Keyed Non Qualified Rate:

  • non qualified downgrades can range from 1.50%-1.99% and are added to the keyed qualified rate. (ex. If your qualified rate is 2.30% and the non qualified rate is 1.90% your total rate is 4.20%)
  • billing address not provided for address verification (AVS)
  • transactions not batched/settled within 24 hrs
  • authorization code is manually keyed (forced Authorization)
  • card type (corporate, government, international, and personal rewards cards)