What Are Non-Qualified Credit Card Fees?

Learn more about non-qualified credit card fees, when they apply, and the different tiers of credit card fees that processors charge for merchants.

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Summary: This blog discusses non-qualified credit card fees, an additional cost for merchants accepting certain credit cards or processing transactions in specific ways. It emphasizes understanding these fees to reduce payment processing expenses.

Main Points:

  • Non-qualified fees are higher costs for transactions using specific credit cards or processing methods.
  • Interchange fees, set by credit card companies, are passed to merchants, with processors adding markups for profit.
  • Fee levels (qualified, mid-qualified, non-qualified) depend on card type, transaction method, and adherence to processor rules.
  • Strategies to reduce non-qualified fees include ensuring compliance with processing rules, shopping for better rates, and negotiating with processors.
  • Swipesum offers expert help in finding suitable payment processors and negotiating fees.

As a merchant, you know how important it is to accept card payments from customers. Credit and debit cards are established, easy to use, and popular among the general public.

The Federal Reserve found that the total value of card payments was $9.43 trillion in 2021, the most recent year for which complete data is available. Credit cards and debit cards continue to be a major economic force, supplanting payment options like cash and checks.  

It’s difficult, if not impossible, to operate as a merchant without accepting this form of payment.

However, accepting debit and credit card payments also means accepting the payment processor fees that are tied to each use of a card at your business. Payment processors are also businesses, and their top goals are to fund their operations and make a profit.  

To support that goal, they charge fees above the actual cost of processing debit and credit cards. Those fees include qualified and non-qualified credit card fees, among many others.

Before we dive into the specifics of non-qualified transaction processing fees, we want to remind you that you have options when it comes to payment processing. There are plenty of providers that offer different rates and fees, and you can negotiate many fees with your chosen provider.

If you’re not an expert in the world of card processing, payment processing service providers, and fee negotiations, don’t feel like you have to take on this task yourself. Swipesum is here to support you with payment industry knowledge and expertise.  

We’ll help you find the best payment processor for your needs, take the lead in negotiations, and optimize your approach to payment processing. Book a free consultation to learn how we can help your business save money and get the most out of payment card processing.

Now, let’s take a closer look at qualified and non-qualified credit card fees.

What are Non-Qualified Fees in Merchant Services?

Non-qualified credit card transaction fees are higher fees charged for the use of certain kinds of credit cards and certain types of payment processing. Generally, these are cards with a benefit or unique function, like a rewards credit card or business credit card. Additionally, a transaction must be processed in line with all of a processor’s rules to avoid a higher, non-qualified fee.

Here’s a closer look at non-qualified fees in merchant services.

Payment processors charge a wide and variable range of fees to their merchant clients. These include interchange fees, as NerdWallet explains in more detail.

Foundational interchange rates, normally between 1.5-3.5%, are set by credit card companies—the payment networks associated with major card brands. These fees are charged to payment processors that work with those networks and card companies.  

In general, payment processors pass along the cost of interchange fees to their clients (i.e. individual merchants). While those foundational rates are out of the processors’ control, they can charge their clients to ensure they don’t lose money on processing transactions. Those payment processing service providers also often add a markup to the base rate, bringing in a profit.

There are also several pricing models used by processors to establish customer costs. In the Tiered Pricing model, the final cost to a merchant depends on many details of each transaction. This includes the type of card used and how it’s processed.

Non-qualified credit card fees make their appearance in Tiered Pricing models. Depending on the type of card used, payment processors will charge different rates.

So, how are qualified vs non-qualified credit card fees established? Individual processors set their own rules about what counts as a qualified, mid-qualified, or non-qualified transaction. Those are the least expensive, mid-level, and most expensive to the merchant, respectively.

Three credit cards seen in a close-up view.

Signs a Card Might Lead to a Mid-qualified or Non-qualified Transaction

There are some guiding principles used to organize different transactions into those fee levels. Rules used by payment processing service providers to sort transactions into different fee levels include:

  • The type of card. Rewards cards, business cards, and some other types of cards cost more to process. That means many processors charge a merchant more for each transaction involving that card.
  • Where the card is processed. If the other rules on this list don’t apply, in-person card transactions generally fall into the qualified fee level. Transactions where cards are processed in other ways, such as online, are more likely to incur mid-qualified or non-qualified transaction fees.
  • Adherence to the provider’s processing rules. While all the factors that determine the transaction type are provider rules, providers specify that certain information needs to be collected. That can include signatures for credit cards, for example. If a signature isn’t collected, then the transaction will end up costing more for a merchant.

What Can Merchants Do About Non-Qualified Credit Card Fees?

Ensuring that transactions follow the processor’s rules, negotiating with processors, and finding a processor with better rates are all possibilities for reducing non-qualified fees. Let’s take a closer look.

Merchants don’t have much control over where customers decide to use their cards (i.e. online or in-store), or the type of card used. However, ensuring that every in-person transaction follows the processor’s rules can reduce the number of non-qualified credit card fees on each statement.

It’s also important to remember that a single payment processor is only one of many such businesses in this industry. Shopping around and looking for better rates, or rates that are more friendly to how a specific business operates, can help keep these costs low.

Negotiation with an existing or new processor is also possible. There’s no blanket guarantee that negotiations will always work, but it’s important to try. It’s not uncommon at all for processors to give customers a break if they ask for it.

Swipesum’s payments industry experts help merchants just like you find the right payment processing partner, negotiate for lower rates, and continually optimize their approach to payments.  

Learn how you can leverage our expertise to save money for your business: Schedule a free consultation today!

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Michael Seaman

Michael Seaman

Michael is the co-founder and CEO of Swipesum. A veteran of the payments industry, Michael and his brother Stephen have led Swipesum since its inception in 2016. In his free time, Michael enjoyes time with his three children.

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