Interchange Optimization for Retail Merchants

Merchants operating in a retail or "swiped" card processing environment can obtain the lowest possible credit card processing costs by ensuring that their transactions don't downgrade to higher interchange rates, and by submitting additional data on business, corporate, commercial, and purchasing cards to access the lowest possible interchange fees.

What Causes Interchange Fee Downgrades & How Can I Avoid Them?

  • One of the most common downgrades is for late settlement. Any transaction that fails to settle within 24 hours of authorization can be liable for a downgrade. The downgrade costs can increase the longer a transaction remains unsettled, increasing to higher interchange fees after 2 days, 3 days, etc. these transactions will appear in the merchant statement as EIRF (Visa), Standard (MC), and Mid-Submission (Discover). These downgrades can be easily avoided by ensuring that your payment terminal or application sends in all sales for settlement ("batches out") at the end of each days business.
  • Another common downgrade is for submitting sales with missing data elements. These can appear in the statement as an EIRF and can also cause Assessment downgrades like Visa Transaction Integrity Fee (TIF). If their payment terminal or application is functioning correctly (getting good reads when the card is swiped), then retail merchants should mainly encounter these downgrades on key-entered sales (phone orders or cards where the magnetic strip is worn and cannot be read). Avoid downgrades on key-entered transactions by always entering billing address info with the sale (zip code and street address number). These are required data elements for key-entered transactions.
  • Downgrades, again EIRF, can also be caused by authorizing or settling for different amounts or forcing a sale through without an authorization. Retail merchants shouldn't encounter these very often unless their business model requires them to either alter the final amount of a sale prior to delivery or if they accept tips. Always void and re-charge sales where the finally purchase price is altered before delivery. Tips will not downgrade as long as the merchant type if allowed a variance for tips (restaurants, beauty salons, etc.) and as long as the amount of the tip is within 20% of the base sale amount. If you are not a merchant type that has a variance for tips, request the tip amount and include it in the original authorization rather than tip adjusting the settlement amount. If you accept tips, consider printing suggested tip amounts on your receipts that will remain within the variance: 10%, 15%, 25%, rather than 15%, 20%, 25%.

Commercial, Corporate, Business, Purchasing, and Government credit card transactions submitted with Level II Card Data can obtain lower Interchange Rates, and thus provide the merchant with a lower processing cost, than the exact same transactions submitted without it. Therefore, it is always in the merchant's best interest to submit Level II Card Data whenever possible.

  • After swiping or keying in a card eligible for Level II rates, the terminal will prompt for a "Customer Code" or "PO Number / # "
  • Ask the cardholder if they know the Customer Code / PO Number. The number is always 4 digits.
  • If the Customer Code / PO Number is unavailable, enter the last 4 digits of the card number.
  • The next prompt will be for "Tax Amount".
  • If charging Sales Tax, enter the amount. If not charging Sales Tax, enter 0. This field is for reporting only, and will not add anything to the total charge.
  • Complete the transaction