Merchant Account Rates Explained: Do You Know How Much Each Credit Card Transaction Really Costs?


Each time a merchant process a credit or debit card transaction, she is charged an inquiry fee and a percentage of the total transaction. The inquiry fee is a flat amount, typically between 20 cents and 35 cents. The percentage charged, is typically called your “credit card rate” and it is variable based on the type of transaction and the type of card used.


Credit Card Rates are typically broken into two categories:

Card Present (where the card is physically swiped through a credit card terminal)–The lowest rates are typically applied to card-present transactions.

Card Not Present (any type of transaction where the card cannot be swiped)–This type of transaction is also referred to as MOTO (mail order/telephone order). All transactions where a credit card is not physically swiped through a terminal, including internet transactions, phone transactions, or credit-card numbers keyed into a terminal, fall into this category.


The rate for each credit card transaction type is determined by both the kind of card used, the way it is processed, and the time it takes the merchant to batch the transactions for processing. It is important to know whether you do mostly card present or card not present transaction when selecting a plan type, because card not present charges are significantly higher in a Type 1 plan than in a Type 4 plan.

Type 1 (or Retail)–This type of account is designed for card-present transactions.

Type 1 Qualified–The card is swiped through a terminal, and the merchant batches the transactions within 24 hours. Most swiped credit cards will fall into this category. It is typically the lowest rate.

Type 1 Mid-Qual–This rate applies to rewards cards and key-entered transactions. It also applies to charges batched in 24-48 hours, that would be Qualified had they been batched sooner.

Type 1 Non-Qualified–All corporate and government cards are charged this rate regardless of batch processing time. Other transactions batched after 48 hours are also charged this rate. This is typically the highest rate charged.

Type 4 (or MOTO)–This type of account is designed for card-not-present transactions.

Type 4 Qualified–Most transactions fall into this category, provided the merchant batches transaction within 24 hours. This is the lowest Type 4 rate.

Type 4 Non-Qualified–All corporate, government, and reward cards are charged this rate regardless of batch processing time. It also applies to charged batched after 24 hours that would otherwise be Qualified had they been batched sooner.


Debit cards are classified the exact same way credit cards are, but the rate for a debit card transaction of the same category and type is typically lower than the rate for a credit card.


1. If you have an account that gives you good rates for card-present transactions it will typically penalize you heavily for card-not present transactions. However, you can get a Merchant Account that is designed for these Card Not Present transactions that will provide you with substantially lower rates. Thus, before selecting an account you need to understand the type of transactions you use most. Also note that it is very important to immediately destroy credit card information provided in writing or over the phone and to store electronically submitted information (such as that submitted over the Internet) on a secure server.

Tip: If you regularly have both types of transactions, create two accounts. One Type 1 account and one Type 4 account.

2. Make sure your credit card processor is giving you separate lower rates for Debit Card transactions. They can afford to charge you less for these transactions, because their risk of non-payment is substantially lower. Approximately half of the transactions nationally are actually debit cards transactions, so if you’re not getting the benefit of a lower rate, you are paying too much.

Tip: Very low Type 1 Qualified Debit Card rates are often advertised as teasers to get people to switch Merchant Accounts. Know what percentage of your transactions fall into this category before making a switch.

Merchants: Make sure you know what you are really paying!

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