How CNP Merchants can Better Process Visa & MasterCard

3. Avoiding Downgrades:

Payment processors often quote discount rates using a tiered model. These tiers are typically called “qualified,” “mid-qualified” and “unqualified.” As you might expect, qualified transactions receive the lowest fees. Mid-qualified and unqualified transactions – also known as “downgrades” – receive higher fees. In most cases, qualification is based on the timeliness and quality of the data passed to the Associations. Regrettably, many merchants receive downgrades on more than one third of their total volume. Some of these downgrades are unavoidable like those from rewards cards and certain international transactions. Merchants can minimize their downgrade rate by insuring that they pass along the correct information (for example, address verification data), and submit settlements in the appropriate time frame. Merchants must therefore work closely with their payment processors to insure that the proper data and settlement standards are incorporated into their sales processes.