Understanding Credit Cards can sometimes be a bit overwhelming so allow Vertex Payment Solutions to provide you with a brief background. It is best to think of the different card types in four separate categories. Debit, Qualified, Mid-Qualified, and Non-Qualified.

– Debit cards typically have the best rates because it is essentially going from the customer’s checking account to your checking account. Very low risk is rewarded with a low rate.

– Qualified cards are your standard VISA, MASTERCARD, and DISCOVER cards. These are typically issued directly from the customer’s bank.

– Mid-Qualified cards are usually rewards cards, ie. Skymiles, Marriott, etc. These have some sort of loyalty or reward program associated with them.

– Non-Qualified cards are issued to people with poor credit typically because they are a higher risk to the bank. Corporate or business cards are the other type that fall into this category. To help you understand, if a business provides employees with company cards, and they were to run up expenses and the business closed, the underwriting bank is left to collect on all of the outstanding debts. That is the reason corporate cards have the highest rates.

American Express plays in their own, separate ballpark. The fees are typically higher because reward or loyalty programs are often involved. This is the reason some businesses simply don’t accept American Express cards, they typically charge a higher rate and more per transaction.

Regarding pricing models there are a few different models in the marketplace. The two most common models are Tiered pricing and Interchange Plus pricing. Tiered pricing is an average of Interchange Plus pricing and is based on the qualification system mentioned above. There are strict rules about the card qualifications that would make a card be downgraded and charged a higher rate.

The term Interchange refers to the credit and debit card interchange rates set by the the big three; VISA, MASTERCARD, and DISCOVER. This is their base cost to process credit card transactions. Merchant Service providers (Vertex Payment Solutions) must collect fees on behalf of the big three for the use of the Card Brand and the ability to process those transactions and that is where the ‘Plus’ comes into play. Merchant Service Providers will add basis points to the rate determined by the big three to cover their costs.

Often times you will see or hear the term ‘Basis Points’, this is used when discussing Interchange Plus pricing. One basis point is equivalent to 0.01% (1/100th of a percent) or 0.0001 in decimal format.