How To Avoid
Interchange Downgrades
Interchange downgrades eat away at small business owners’ profits.
How To Avoid
But first…
What are interchange fees?
Interchange fees are the rates business owners pay to accept credit and debit cards. Each transaction has a target category which has the lowest fee for the given transaction type.
However, things don't always go according to plan.
If the transaction doesn’t include all required information, it can downgrade!
What is an interchange downgrade?
Downgrade = Higher Interchange Fees
A downgrade is when a transaction doesn’t meet the minimum requirements for the target interchange category and costs the merchant more money.
Who pays for downgrades?
BUSINESS OWNER
The additional cost to process the transaction comes out of the business owner’s pocket.
Who profits from them?
BANK (Card Issuer)
Your credit card processor does not make any money from downgrades.
How can I spot downgrades?
If you see the following terms on your monthly statement it means the transaction downgraded, costing you more money:
- EIRF*
- Standard
- Non-Qualified Fee Program
* Electronic Interchange Reimbursement Fee
In July 2020, Visa combined EIRF and Standard into the new Non-Qualified Fee Program.
4 STEPS
TO PREVENT DOWNGRADES
- Always batch out your terminal at the end of each day.
- Perform an address verification on all e-Commerce and hand-keyed transactions.
Never settle a transaction without an authorization.
In general, don’t authorize and settle transactions with different amounts unless your business accepts tips or you have specific knowledge of card brand rules for your industry where different amounts are allowed.
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