Creative Processing

Finally, we leave the best till last. Imagine you see a company offering credit card processing rates as low as 1.18%. You sign the contract expecting you got the bargain of the century. In no time, you notice that this processing rate never seems to apply to you. Why?

It’s simple. They manipulate their rate structure so published rates will not apply. In this case "Creative Processing" doesn't work to your advantage. Many of these rates, i.e. 1.18% are below even their costs. Here’s what happens...

Credit Card Processing rate structures are divided into different qualification categories, also known as “Bins” or “Tiers.” Typically, you should expect a three tier processing structure which will represent different card types:

Qualified rates:

These are typically “standard” charges as defined by the Merchant Provider. These are normally the lowest rate a merchant will be charged for credit card processing. You can expect all major credit cards will fall into this category.

This rate category is assigned based on how the majority of cards will be processed, i.e. swiped cards, vs. non-swiped. Swiped cards are processed at the absolute lowest rate because the merchant sees and swipes the physical card through an appropriate terminal which limits the potential for a fraudulent charge. MOTO (Mail Order/Telephone Order), internet transactions, including mobile phone processing are not considered “Swiped” and are charged at higher “card not present” values.

Your “Qualified” rate may differ depending on the types of transactions you process.

Mid-Qualified rates:

“Mid-Qualified” rates apply when the default rate criteria isn’t met. This may be because a retailer who normally “Swipes” cards processed the request without the physical swipe. Other types of card transactions routinely fall into this category including rewards or business cards. (ONLY REWARDS CARDS, MILEAGE CARDS ETC . BUSINESS CARDS GO TO NON QUALIFIED BIN)

Some transactions, such as reward cards, can be upwards of 40% of the total number of transactions, so you’ll want to pay close attention to this tier. To complicate matters, a transaction can be considered Qualified and Mid-Qualified. For example, if your Qualified rate is 1.5% and your Mid-Qualified is 1% you could be processed at a rate of 2.5%.

For practical purposes, the Mid-Qualified rates exist to offset increased interchange costs. Rewards cards, for example, require a higher interchange cost to validate. The abuse of this tier is often responsible for questionable processing practices.

Non-Qualified rates:

Non-Qualified rates are the highest percentage rates charged to a merchant for a transaction. This category applies when the transaction doesn’t fall into either the Qualified, or Mid-Qualified tiers.

Examples of Non-Qualified rates may include:

  • A card keyed into a terminal instead of swiped.
  • Business Cards are used and not all the required fields are entered.
  • As a merchant, you don’t settle your batch in a timely manner.

The Deception:

The credit card processing company will quote and list an extremely low transaction rate. In order to honor this quoted rate, the provider will allow one particular type of transaction (i.e. a Visa Debit Card) to use the Qualified Tier, and send other normally standard transactions into the Mid or Non-Qualified Bins. By altering the Bin and Tier structure, a Merchant Service Provider can increase his profits, at your expense. Too many vendors discover this deception only after they have signed a 3-year contract, with early termination fees. Be wary of any merchant who is offering a transaction rate that seems to be too good to be true, because it probably is.

For more information about 1st National Processing, Mobile Solutions, Merchant Accounts, Credit Card Machines, Supplies, and Gift Card Programs, please visit our website at, or give us call toll free to talk to an account specialist:


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