Merchant Account Discount Rate

The discount rate, or discount fee, is the percentage of a sale that is charged to process a electronic transaction.

Discount rates and fees can get very complex, but most merchant accounts function on a three-tier discount rate schedule.

• Qualified Rate - Lowest Rate
• Mid-Qualified Rate - Middle Rate
• Non-Qualified Rate - Highest Rate

The card associations (VISA and MasterCard) assign percentage increases that are charged when a merchant processes a certain type of credit card, or performs a transaction in a certain way. When operating on a qualified, mid-qualified, non-qualified rate system each of these different transactions are generalized (usually rounded up) so that they fall into one of these three categories (qualified, mid-qualified, or non-qualified).

Visa and MasterCard collectively have many different card categories and classifications. There are two main reasons why a transaction may go from the low qualified rate, to the higher mid or non-qualified rates. When a transaction is charged at a higher rate, it is said to have downgraded.

Generalizing how a credit card transaction will qualify is almost impossible because of all the variables and restrictions that are outlined in the VISA and MasterCard Qualification Matrix. You can read more about the Qualification Matrix in the Merchant Account Guides and Tutorials section of the Merchant Council. With that said, we have given you a general idea of how certain types of cards, and methods of charging cards, will qualify in the text below.

Type of credit card accepted
Personal credit cards and some small business cards will charge at the qualified rate. However, corporate credit cards, business credit cards, International cards, and rewards cards will almost always charge at the higher mid or non-qualified rates.

There are certain types of merchant accounts that are setup under the assumption that almost all transaction will consist of corporate, business, or international cards. These merchant accounts will make it possible for these types of purchase cards to be charged at lower qualification rates. If your business will be accepting primarily corporate or international credit cards, you should research level II and level III processing accounts.

Qualified Discount Rate - The lowest possible transaction rate that a merchant may achieve.

Mid-Qualified Discount Rate - An adjusted increase in the qualified processing rate charge for a specific transaction that is based on the type of credit card being processed, and/or the manor in which the card is charged. Most corporate credit cards, business cards, and rewards cards will run through as mid-qualified.

Non-Qualified Discount Rate - An adjusted increase in the qualified processing rate charge for a specific transaction based on the type of credit card processed, and/or the manor in which the card is charged. International credit cards, and corporate credit cards that are not entered correctly will typically be charged at a non-qualified rate.