Clearing relevant target interchange categories for the lowest possible rate is quite the feat. Many business owners waste thousands of dollars each year because they’re unaware of interchange optimization and how it can change their outlook. Don’t let this happen to you!
I’m a financial expert at Richmond Financial Services, with years of experience in payment processing. I’ve helped hundreds of businesses in the home heating and fuel industry get the lowest possible rate. I’m most proud of successfully lobbying Mastercard to reclassify home heating retailers into a low-risk utility processing category.
Based on my experience, here are three ways to make sure you’re clearing target interchange at the lowest possible rate for all four major credit card companies (Visa, Mastercard, American Express, and Discover).
Pick your pricing plan
There are different types of pricing plans to help you optimize your business and save money. Here’s a closer look at the models you can choose from:
1. Interchange pass-through pricing. This pricing model is the most transparent and provides great benefits to business owners. The processor charges you the actual cost of interchange and a separate mark-up. If your interchange costs are lower, you pay less.
2. Bundled pricing. This type of pricing falls into three categories: qualified, mid-qualified, and non-qualified. The processor assigns a rate to each tier and then routes your transaction to those tiers. Unfortunately, bundled pricing makes it difficult to optimize the interchange since you cannot secure a competitive pricing solution.
3. Flat rate pricing. This plan offers savings during interchange optimization. In fact, you won’t even know you’re downgrading because flat rate processors don’t provide a lot of detail.
Avoid interchange downgrades
Interchange downgrades are difficult to understand but are easy to avoid.
A downgrade happens when a transaction routes to a category that is priced higher than the target category. When this happens, the rate used to calculate the transaction increases or “downgrades.” Downgrades can occur for various reasons, including failure to use AVS, stale authorizations, and not providing a reason for a customer code. To avoid these situations, be sure to request a downgrade report from your credit card processor to better diagnose the situation.
Hire a consultant
If you’re not exactly sure how to optimize your payment processing plan or even what you’re business is lacking, then it’s time to hire a consultant to help you create an optimization strategy. By working with a consultant, you can get your investment back quickly, because your internal processes will be so much more efficient. I look forward to hearing from you!
