How to Reduce Card Acceptance Rates

It’s been a long-held practice that the card brands make rate adjustments twice a year in April and October. After delaying some interchange fee increases because of the pandemic, the card brands have implemented the planned 2022 increases this April. 

This year’s pricing updates are less noticeable than past years with most changes impacting dues and assessments, which are tiny fractions paid to the card brands as a pass-through cost that most Energy Marketers will not likely notice. Notable changes include an increase on the Visa Services rates for Energy Marketers which are going up by about 0.10% (on average) and Mastercard is increasing Consumer, Consumer Rewards, and Consumer Enhanced Utility rate programs by $0.10. Even with this increase, Mastercard will still be the most cost-effective card choice for our industry.

There is not a lot we can do about the card brand increases, however, there are small things that we can control that will save us significant money on our card acceptance costs. Below are some tips of the trade:

  • First, Marketers have to make sure they are qualifying correctly, taking advantage of the Utility rate at Mastercard/Discover, and providing the necessary information to qualify for Visa’s Service rates. That means two different MCC Business classification codes, which not all processors support. This one change will save Energy Marketers the most amount of money.
  • Make sure your company is utilizing updated technology to qualify business and purchasing cards correctly. Business cards fall outside of the Utility/Services programs and thus are more expensive, not passing these correctly could mean that your rates downgrade to a more expensive rate. Downgrades are expensive and can cost Energy Marketers an additional 100 basis points in the case of Visa business cards.
  • Negotiate the Discount rate. This is the rate the processor charges to keep the lights on. This is usually the first thing companies focus on, however, 80% of your overall costs are card brand related charges such as the ones above, therefore if you don’t have the other two buttoned up, you are surely overpaying for your payment acceptance. Also, be wary of a discount rate that is too low. You get what you pay for (more on this below).
  • Be wary of flat rate programs. In theory they sound great, but in a flat rate program you lose the benefit of the cost break on Mastercard and Discover as well as on Debit cards. In addition, since the card brands adjust their rates twice per year, we have seen companies in these rate structures see rate increases. If you do find yourself in a flat rate plan, run a card mix audit at least once a year to make sure you’re not losing out on the benefits of less expensive cards.
  • If you have a business that utilizes a pre-auth model make sure the pre-auth performs a refusal on the original auth to still qualify for the Utility and Services rate.  Also, If the “auth and capture” don’t occur within a specified period of time (3 days for Mastercard and 7 days for Visa), the transaction downgrades. Depending on the type of card, downgrades can increase to 3% versus a $0.75 flat rate at Mastercard and Visa costs can increase 100 basis points or more.
  • If your company is key-entering a majority of cards on a retail terminal, you may want to consider using a virtual terminal because the pricing benefits of a retail account are lost when the card is not swiped and the transaction will downgrade to a more expensive rate.
  • Read the notification section on your merchant statement. Merchant statements are designed to be confusing, but this section is important. This section will identify any new rate increases, surcharges, or card brand changes. You may have several months where there are no notifications, but since card brand increases come out in October and April, pay special attention to your February and August statements. Some processors also sneak in a Discount increase with the card brand changes during this time and you have a 30-day window to question these new fees. If you see a fee that doesn’t make sense, ask your processor, that is what we are there for. 

Keep in mind that as with all businesses, processors have a cost to keep the lights on. Over the years companies have concentrated so much on the Discount rate that they find themselves in a situation where their super low rate no longer covers the expense of servicing by the processor. At some point something has to give, whether it is functionality or service a company cannot continually update their technology or service an account properly if they are losing money. Much like a marketer making deliveries or service calls that are below cost, eventually you need to increase your fees or inform them that you can no longer service them. We have seen this play out in the past year. We have seen surcharges and fee increases in separate line items, ultimately negating a lower discount rate. Service, technology and the product functionality it yields may be important to your business. It’s always best to ensure you’re aware of the upgraded tools available to the industry and their potential to positively impact your bottom line.—Marci Gagnon

Marci Gagnon is the Vice President of Strategic Alliances for Qualpay and has been in the payments industry for over 15 years with a concentration on recurring billing and the Energy space. Qualpay provides processing solutions to fuel delivery and service businesses with tools designed to provide real-time reconciliation and cost reduction. For additional information contact Marci Gagnon at marci@qualpay.com or visit https://www.qualpay.com/industry/utility-and-energy.

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