Since the arrival of COVID-19, small business owners have been facing many difficulties in their businesses. Considering the present situation where maintaining social distance has become very important, people are giving more preference to cashless transactions. Moreover, after this pandemic, the mode of transaction will be changed. Yes, in the future, people will not carry hard cash and therefore, small merchants will have to make new strategies to cope up with the competitive market. They will need new ways through which they can accept credit card payments online.
We at International Payment Solutions understand this situation and therefore, we have introduced our advanced payment solutions that will take the entire bill payments process to the next level. However, if we talk about the online payment pricing structure, it is very complicated and for a new business owner, it is very difficult to understand this complicated process. There are different types of pricing structures such as flat rate pricing, interchange-plus pricing and interchange differential pricing. Among these interchange-plus pricing and interchange differential pricing.
Before getting into this complicated pricing structure, the merchants must understand how the credit card transaction works. Well, it is a real-time process. Credit card network, credit card issuing bank and merchant processor work behind this real-time process. Therefore, they take a specific charge for providing this service. Depending on these charges, various types of pricing structures are set. We have elaborated the credit card transaction process below. So, have a look at the following points:
Generally, customers swipes or taps their cards on the credit card machine and thus they initiate the credit card transaction.
After that, the merchant processor passes the information regarding the transaction to the credit card network.
The credit card network shares the information with the credit card issuing bank. The bank then checks the available credit in the account of the customer. Depending on the credit, the bank approves or declines the transaction and shares the same with the credit card brand.
The credit card brand then passes the information with the merchant processor and thus the entire transaction gets completed.
Now, from a customer’s perspective, the credit card processing is very simple. But, when it comes to the merchant’s end, it becomes very complicated. Merchant has to pay a credit card processing fee. However, if we talk about the merchant processor, they have been trying to utilize interchange different pricing since 2011. Well, you will get to see a similar story in the United States. The monthly statement of interchange differential pricing is very expensive. Therefore, it will be hard to understand for a new businessman who has just started his or her business.
We at International Payment Solutions understand this and therefore, we offer a low interchange-plus pricing structure to all our customers. We keep our policy very transparent to all our merchants. However, understanding interchange differential pricing is also very important and therefore, we have elaborated it here.
Interchange Differential Pricing
Well, interchange differential pricing structure is not very common in the U.S. However, it is very popular among the Canadian merchant processor. It is almost similar to tiered pricing where merchants have to pay different credit card processing fees for accepting card payments. In the case of tiered pricing, merchants pay a lower qualified rate for making certain types of transactions. Non-qualified and mid rates are there for other types of transactions. Well, tiered pricing is very popular in the U.S. whereas interchange differential pricing is very common in the Canada merchant processor solutions.
In the case of interchange differential pricing, merchants have to pay non-qualified and qualified fees. Along with this, they have to pay interchange differential fees for accepting credit card payments. In such a scenario, merchants generally pay multiple fees for making the same credit card transactions. Ultimately, the billing amount becomes double.
The merchant processor issues the qualified rate and it can be anywhere between 1.5% and 2%. However, such a rate is applicable for limited cards such as Visa and MasterCard consumer cards. In the case of card present transactions, a chip or pin must be used. Other types of credit cards that are generally processed online or manually keyed are not qualified for this rate.
The Non-Qualified Rate
The merchant processor issues the non-qualified rate and it is applicable for all other types of credit cards. The non-qualified rate can by anything between 0.25 percent and 0.50 percent.
The Card Brand Fee
Another fee that is inextricably associated with it is the card brand fee. The credit card network generally issues this fee for providing their services.
Not An IPS Merchant?
By now, you have probably understood the various aspects related to interchange differential pricing. Now, if you want to accept online credit card payment, you have to pair your business with any merchant processor solution such as International Payment Solutions. So, what are you waiting for? Get in touch with IPS today.