6-7 Third Party Processing Software & Equipment

Third Party Credit Card Software & Equipment Applications

VISA and MasterCard operate using a complex system of transaction qualification rates. Some of this has already been discussed in the previous section titled "Merchant Account Rates & Fees", and the topic will be covered in greater detail in the upcoming section titled "Reading Merchant Account Statements".

Every credit card transaction that you process is assigned a certain qualification rate by the processor based on a number of different criteria that is passed from the credit card processing equipment. If all of the appropriate criteria is present and acceptable the processor will charge the qualified (lowest) rate for the transaction. If all of the criteria is not present or correct, the transaction will be charged at either the mid or non-qualified rate by the processor, which are more expensive.

Credit card processing equipment must know how to communicate with the processors so that it is able to supply the processor with all of the information necessary to process the transaction, and more importantly, to process the transaction at the best possible rate. In order for a piece of equipment to do this it must know all of the different rates, fees, criteria, etc. in the VISA and MasterCard Interchange Qualification Matrix.

Credit card terminals and equipment from major manufacturers will comply with this matrix and will be able to communicate properly with the processor's platform. Some applications and equipment manufactured by smaller third-party companies may not be correctly configured, or they may lack the information necessary to maximize the number of qualified transactions.

Most businesses do not have to worry about this issue because they are or will be using a credit card terminal from a well-known manufacturer. However, any business that has or is looking into customized point of sale systems (POS) or third-party processing applications should make sure that whomever is constructing the application has experience and a proven track record in their field.

If a processing terminal or application is not effectively able to communicate with the processor, the only warning sign will be a significant increase in mid and non-qualified charges on your merchant account statement. By the time the problem is tracked to the terminal you may have already lost thousands of dollars.

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