The Two Components Of​ A Credit Debit Card Transaction

Each time a​ merchant process a​ credit or​ debit card transaction, she is​ charged an​ inquiry fee and​ a​ percentage of​ the​ total transaction. the​ inquiry fee is​ a​ flat amount, typically between 20 cents and​ 35 cents. the​ percentage charged, is​ typically called your "credit card rate" and​ it​ is​ variable based on the​ type of​ transaction and​ the​ type of​ card used.

Credit Card Rates are typically broken into two categories:

Card Present (where the​ card is​ physically swiped through a​ credit card terminal)--The lowest rates are typically applied to​ card-present transactions.

Card Not Present (any type of​ transaction where the​ card cannot be swiped)--This type of​ transaction is​ also referred to​ as​ MOTO (mail order/telephone order). All transactions where a​ credit card is​ not physically swiped through a​ terminal, including internet transactions, phone transactions, or​ credit-card numbers keyed into a​ terminal, fall into this category.


The rate for​ each credit card transaction type is​ determined by both the​ kind of​ card used, the​ way it​ is​ processed, and​ the​ time it​ takes the​ merchant to​ batch the​ transactions for​ processing. it​ is​ important to​ know whether you do mostly card present or​ card not present transaction when selecting a​ plan type, because card not present charges are significantly higher in​ a​ Type 1 plan than in​ a​ Type 4 plan.

Type 1 (or Retail)--This type of​ account is​ designed for​ card-present transactions.

Type 1 Qualified--The card is​ swiped through a​ terminal, and​ the​ merchant batches the​ transactions within 24 hours. Most swiped credit cards will fall into this category. it​ is​ typically the​ lowest rate.

Type 1 Mid-Qual--This rate applies to​ rewards cards and​ key-entered transactions. it​ also applies to​ charges batched in​ 24-48 hours, that would be Qualified had they been batched sooner.

Type 1 Non-Qualified--All corporate and​ government cards are charged this rate regardless of​ batch processing time. Other transactions batched after 48 hours are also charged this rate. This is​ typically the​ highest rate charged.

Type 4 (or MOTO)--This type of​ account is​ designed for​ card-not-present transactions.

Type 4 Qualified--Most transactions fall into this category, provided the​ merchant batches transaction within 24 hours. This is​ the​ lowest Type 4 rate.

Type 4 Non-Qualified--All corporate, government, and​ reward cards are charged this rate regardless of​ batch processing time. it​ also applies to​ charged batched after 24 hours that would otherwise be Qualified had they been batched sooner.


Debit cards are classified the​ exact same way credit cards are, but the​ rate for​ a​ debit card transaction of​ the​ same category and​ type is​ typically lower than the​ rate for​ a​ credit card.


1. if​ you have an​ account that gives you good rates for​ card-present transactions it​ will typically penalize you heavily for​ card-not present transactions. However, you can get a​ Merchant Account that is​ designed for​ these Card Not Present transactions that will provide you with substantially lower rates. Thus, before selecting an​ account you need to​ understand the​ type of​ transactions you use most. Also note that it​ is​ very important to​ immediately destroy credit card information provided in​ writing or​ over the​ phone and​ to​ store electronically submitted information (such as​ that submitted over the​ Internet) on a​ secure server.

Tip: if​ you regularly have both types of​ transactions, create two accounts. One Type 1 account and​ one Type 4 account.

2. Make sure your credit card processor is​ giving you separate lower rates for​ Debit Card transactions. They can afford to​ charge you less for​ these transactions, because their risk of​ non-payment is​ substantially lower. Approximately half of​ the​ transactions nationally are actually debit cards transactions, so if​ you're not getting the​ benefit of​ a​ lower rate, you are paying too much.

Tip: Very low Type 1 Qualified Debit Card rates are often advertised as​ teasers to​ get people to​ switch Merchant Accounts. Know what percentage of​ your transactions fall into this category before making a​ switch.

Merchants: Make sure you know what you are really paying!

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