9. WHY THE CONTINUAL VISA/MC RATE CHANGES?

Like many business owners and managers, you have probably asked yourself why the credit card processing rates seem as though they are continually going up each year. How much higher can they go, and when will it stop? Also, is it worth it to switch to another processor for promised "savings?" Luckily, you have EMG on your side. We’ll help explain the semi-annual interchange rate adjustments made by Visa and MasterCard.

Semi-annually, in April and October, Visa and MasterCard may release rate adjustments to their interchange categories to all merchant service providers alike. Although the rates may feel as though they are continually increasing, there are a number of rates that decrease as well. Since the rate changes by Visa and MasterCard are a mystery to many merchants, we at EMG hope to better explain the reasons for the semi-annual changes.

First of all, the interchange category is based on the card type that is presented at your business. This can vary from corporate cards, rewards cards, check cards, etc. Each category of credit card has specific discount rates and transaction fees associated with it. So, if a certain credit card type is key-entered into the credit card terminal instead of swiped, it has its own set of discount rates and transaction fees that apply. For example, an online transaction that has the CVV2 code (the 3-digit number on the back of the card) and the address of the cardholder submitted at the time of sale will be eligible for a less expensive interchange category than if the address was not submitted. Since each transaction is evaluated individually, various interchange rates can apply within one batch of merchant transactions.

Visa and MasterCard continually reevaluate their interchange categories to be sure that the pricing associated with those categories is reflective of the risk involved in accepting that type of card. As an example, in a previous review, Visa and MasterCard discovered that rewards cards were a higher risk and had an increased cost in management of those card types, so a new category was created just for those card types. Subsequently, higher costs were passed along to the merchants processing those card types. These increases take place in various forms depending on the pricing system that a merchant’s business is set up on. The majority of merchants are set up with a "Bucket System" which allows the merchant service provider to increase the rates as they determine to be necessary.

At EMG, we value our merchants’ business and strive to be as upfront and forthcoming as possible in releasing this rate increase information to our merchants. Each time that there is an increase or a decrease in interchange rates, EMG notifies our merchants 30 days before the change is to take place. This is done on the merchant statement received the month prior to the increase. For example, if you refer to your March statement, you will see the notice of the rate increase on the very first page. Although some merchant service providers may choose to utilize these Visa and MasterCard increases as an opportunity to arbitrarily raise rates even further, EMG passes through the cost of the interchange rate increases to merchants as closely as possible. This may be the reason that you chose to switch to EMG for your processing services. We offer great rates to earn your business, and we will continue to offer great rates for the life of your business.

EMG takes pride in what we do and have many customer service alternatives to help you understand your merchant account. With local representatives, a 24-hour customer service line, and www.EMGservice.com, you can turn to many places for information regarding your account, including Visa/MasterCard rate changes. If you have more questions about the rate increase or your account, just let us know.

“We Know This Stuff!”