Your virtual terminal is essentially our point of sale system on the world wide web. These payment portals promise easy transactions and offer merchants an easy avenue through which you can conduct sales and process credit card payments online. However, your virtual terminal could be costing you more than you realize when it comes to interchange rates from the credit card companies.
Interchange Rates Basics
Interchange fees are the fees a credit card company’s bank collects from merchants for each transaction. This fee typically accounts for the bulk of costs involved in processing credit card payments for merchants and is usually somewhere in the neighborhood of 1.81 percent for credit card transactions.
These fees are non-negotiable fees set by the credit card companiesthemselves and not by the services providers merchants employ to process credit card payments.
However, this is where things become a little less clear for merchants accepting credit card payments. While the base interchange fee may be 1.81 percent, there are three different interchange rates that seriously impact the cost you pay for the transaction. Like interchange fees, these rates are determined by credit card companies that have their own criteria for preferred rates as well as downgraded interchange rates (which are not the good thing they may sound like).
Overview of Levels One, Two, and Three Processing
When it comes to credit card processing there are three primary processing levels assigned to transactions.
- Retail and POS (point of sale) transactions.
- P Cards (purchasing cards), B2B (business to business) and B2G (business to government) with minimal data capture.
- P Cards, B2B, and B2G with maximum data capture.
Level one transactions are typical retail transactions made by cardholders using personal credit cards American banks commonly issue.
Level two transactions are typically made with corporate credit cards American banks issue.
Both these types of transactions can be run through standard credit card terminals if they are set up properly to receive these types of transactions.
Level three transactions, on the other hand, require special software that transmits additional data about the purchase and the transaction at the time of purchase.
Because level two and level three transactions collect more data from customers than traditional retail transactions (level one), if your business deals with a lot of downgrades and the higher interchange fees that occur as a result, it might be worth considering checking into levels two or three processing. Doing this allows you to collect more information for each transaction which reduces the likelihood of downgrades.
The True Costs of Virtual Terminals
The costs involved in using virtual terminals aren’t always the upfront costs you’ll pay for the service provided. Instead, virtual terminals, like Authorize.net for instance, fail to collect the necessary information to meet PCI-DSS standards that allow you to achieve the highest possible merchant level.
These standards are designed to promote payment security. Not only do they protect the credit card companies, but they also help protect your business and your reputation. However, some of the risks and rewards are more immediate. One of the risks you experience when failing to comply with PCI Data Security Standards is higher interchange fees from credit card companies.
It is these higher fees that drive the costs of your virtual terminal much higher. There are options for your business that can help you obtain higher merchant levels to secure the lower interchange rates. BankCard Services is here to help you every step of the way so you can achieve the higher merchant level and so you can accept a variety of payments. Contact BankCard Services today to learn about the many ways we can help you with all your credit card processing and other merchant services needs with free equipment, monthly agreements, and no long-term contracts.
