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Blaming Credit Card Institutions for Speed Changes

Visa, MasterCard, and Discover generally change terms and rates in April and October. But, they can make changes at other times during the year, as will happen this season. Unfortunately, through time, some suppliers have taken advantage of these changes by increasing their fees and rates apparently due to these card association and business changes. However, lots of the supplier increases were well past the actual card associations and business changes.

Below is a reprint of a telling one supplier sent merchants last year concerning the October 2012 changes.

Card Institutions periodically review their interchange rate plans and other penalties. Modifying them as they deem appropriate. This is to advise one of the institutions have recently announced modifications to many of the interchange rates and other fess. Based on many different factors, including the recent institution actions and other business factors, we’ll be raising your discount prices.

Effective October 1, 2012 if your account is set with tiered pricing discount rates will be raised by: Mid Licensed 0.15 percent Non Qualified 0.2 percent.

Credit cart speed change notice example.

This supplier increased Mid-Qualification and Non-Qualification prices because of its merchants on tiered prices. Standard reward cards and other card types generally fall to the Mid-Qualified prices. Commercial cards, higher end reward cards, and transactions which don’t meet qualification requirements generally fall to the Non-Qualified pace.

When you read the above rate increase detect it could feel like Visa, MasterCard, and Discover are the offenders. However, the truth is that they didn’t apply any changes that justified these speed increases. In actuality, a number of their changes in October actually lowered certain interchange prices.

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April Changes Were Minor

The real changes in April were small for many merchants.

First, understand that the card associations and businesses only implemented a few general changes in April. The majority of the changes were semantics with Visa creating a new interchange category for industrial prepaid cards and MasterCard renaming its enhanced value for small business interchange. Any rate varies with these apps will have a very minor influence on the normal merchant — if any impact in any way.

The one change that requires brief mentioning is MasterCard’s growth of its”Acquirer Support Fee.” This fee applies when a customer purchases goods and services by a U.S. merchant and pays using a MasterCard issued outside the U.S. MasterCard increased its fee in April from 0.55 percent to 0.85 percent. This implies that for each $1,000 bought with a non-U.S. issued card, MasterCard will now charge $8.50 instead of the previous $5.50. Transactions using MasterCard cards issued at the U.S. aren’t charged this fee.

To understand how your supplier is implementing such changes, you first must review any alarms on the last statements in addition to the announcement for April activity. The above notification for the October 2012 changes was on a statement merchants received in September for their August processing action. You will normally find supplier notifications on the last page of this statement.

Frequently the finds can appear somewhat cryptic, much like the example below. A supplier recently sent this note to its merchants regarding the April 2012 changes.

Effective May 1, 2013, all international MasterCard consumer apps for card not present companies will move from speed 2 to speed 3. For card present companies, MasterCard international electronic programs will proceed from speed 2 to speed 3 and the rest of the international MasterCard consumer applications will move in rate 3 to speed 4 in response to pricing fluctuations obtained from MasterCard.

If you don’t understand the change, have your staff contact the supplier to get specific details on precisely how you’ll be impacted. However, there shouldn’t be any flat-rate rate rises because of the Visa and MasterCard April fluctuations as was seen from the October 2012 notice revealed before. If your supplier is implementing an flat-rate rate growth it isn’t due to any modifications made by Visa and MasterCard in April.

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Below is a more appropriate notice one supplier sent its merchants regarding the April 2013 change. This note specifically notes the 0.30 percent growth by MasterCard and states that the commission will be passed along to the merchant, which is reasonable.

Effective April 1, 2013 MasterCard will increase the Acquirer Processing Support Fee (APSF) by 30 basis points (.0030) for transactions paid for with a card issued outside the USA and settled in US dollars. This increase will be passed along to you if it apply to a given transaction.

Bear in mind which you may also have a professional business audit your invoices for fee or rate changes should you not feel comfortable doing this yourself. However, make sure that the company isn’t affiliated with or receiving compensation from some other suppliers. There are some great companies keen to run free and confidential audits. The audit should be conducted to educate you in your present processing situation. It shouldn’t be done to attempt and convince you to change suppliers.

Overview

  1. Some suppliers have taken advantage of card business changes by raising rates.
  2. The April 2013 changes are small for the ordinary merchant.
  3. Afford the time to audit your announcement or have an independent professional audit .

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