8th December 2017
Home » Bisnis Online » Nostalgia for the Credit Card Rates of the Good Old Times
May 11th, 2017 Cat: Bisnis Online

The government sees us buffeted around by the recession, and lowers its benchmark interest rate for credit card borrowing to next to nothing. So why do we still get bills that seem higher than ever and keep reading about how this is nothing compared to how high the fees and rates are going to go? That isn’t how it works usually; when Wal-Mart uses strong-arm tactics with its suppliers to lower their prices, we usually benefit from it and see lower prices; when the Federal Reserve cuts credit card rates, the credit card companies are supposed to just pass the benefit onto us, so our monthly payments are lower and our interest rates too. Apparently, we’re just paying the price now for all the mistakes they made in the past, handing out multiple credit cards to anyone who applied, and sometimes to people who didn’t apply – just tempt them into accepting one. They’ve made so many losses over the years, that they need to milk us dry now to make up for it. So now their carelessness brings us here: even if you have been the perfect credit card customer, Citibank and American Express believe that you need to pay two or three percentage points higher for carrying a balance, and if you were hoping for a few rewards for being a responsible customer, well, those programs have been shelved indefinitely.

You have to look at what those credit card companies are dealing with; all those people they dealt easy credit cards out to like they were dealing cards around a poker table before, have racked up very high charge-offs, you know, what you and I would call bad debts. They amount to 5% of all the credit card charges they financed. So now Citibank and Amex are looking to you and me to pay higher credit card rates and fees, so that they can do something about all the money they lost. So who do we charge more to make up for what we lose to Citibank and Amex? They must feel it would not make the game quite as much fun for them if they continue to let you enjoy a certain amount of credit freedom on your cards. They feel that there are quite a few people out there who are teetering on defaulting on their credit card bills; so to head off potential losses like that, they just want to cut your credit.

Good solid citizens, people who work in management firms, software businesses, all report stories like how they used to have a $15,000 credit line, until suddenly Amex notified them that they would have to get by with a $500 credit line from now on. And the reasons they hear for why this was done to them, are pretty incredible too. They run to lines like, “Oh, you have a credit card issued by that other bank too; and we see that they made some bad choices in customers to issue credit cards to in the past; if they made bad choices with customers in general, who knows, you could be a bad choice they made too; so we don’t really want to take a risk on you anymore”. If that is not incredible, I don’t know what it is.

And one thing that really hurts, is the way their promotional deals and rewards programs, once through the roof, are now out the window. Balance transfers on Amex for example, were 5% for the life of the balance. Now, they give you a limited period only. Discover too always said that they would never charge you a balance transfer fee that was higher than $75; they have taken that away now. The best thing to do now to get in the good with the credit card companies is to carry low balances on your card. If you carry anything without paying it back on any of your cards, all the other companies are going to know. They always have lower credit card rates and fees for people who regularly pay more than the minimum monthly payment.

You can of course opt out of your credit card if they raise their credit card rates unduly and unfairly. It could hurt your credit score, but this is something you could recover from.

Merchant Services - Understanding the Rates and Fees Associated With Credit Card Processing

By Derrick Tulali

The rates that merchants get charged to process bankcards are called Discount rates, Item fees, and Monthly statement fees.

Discount rates are typically broken down in several categories called Interchange. Although interchange may include 100%2B different rates that change yearly, usually an increase passed on by Visa, MasterCard, and Discover. However, most cases ISO's (Independent Sales Organizations) charge these discount rates into what is called bucket rates to the merchant. These bucket rates include: Qualified, Mid- Qualified, and Non-Qualified rates.

Qualified rates are bankcards that are swiped with customer card present, and do not reflect any kind of reward credit cards such as: Flyer miles, Bonus cash, or any kind of Incentives for the cardholder. Qualified has the lowest discount rate that gets charged to the merchant. The reason for this is because there is a lower chance for the merchant to get a chargeback and less risk for both the merchant and Visa/MasterCard to absorb the cost of accepting a fraudulent bankcard. Qualified rates can range from 1.65%-1.95% (depending on type of business). Mid-Qualified rates are bankcards that are not present or known as keyed-in transactions. For example: Phone orders or Cards that won't swipe. Furthermore, Reward cards also fall into the mid-qualified category as well. In essence, Mid-Qualified has a higher discount rate that is charged to the merchant because of the keyed-in and reward bankcards. If a bankcard is not present it has a higher risk of being a fraudulent card because there is no way to verify card holder identity. Reward cards on the other hand, fall into the mid-qualified category because it is in fact the merchant that absorbs the cost of Visa/MasterCard's ability to offer the incentives that are involved with a reward card. Mid-Qualified rates range from .85%-1.29% (depending on type of business) in addition to the Qualified rate. Non-Qualified rates are Business, Corporate, and International bankcards. Non-Qualified has the highest discount rate that is ever charged to the merchant. There are several reasons why this is the case. The bankcards that fall in this category either have the highest limits or highest risks possible. Business and Corporate usually have the highest card limits and the processing company, upon approval, deposit the funds into the merchants account before the processing company itself has received the funds. International cards are the highest risk and require the most verification of all bankcards. Furthermore, more cases than not, the processing company has to calculate and withdraw the rate of exchange of what ever Countries' currency to the U.S. dollar. The discount rate in the Non-qualified category is the same whether the bankcard is present (swiped) or not (keyed). Non-Qualified rates range from 1.12%-1.63% (depending on type of business) in addition to the Qualified rate.

Item fees are charged in addition to the discount rate. These fees are reflected every time a merchant receives a bankcard in which an approval is obtained or the merchant has to Settle (batch out) all the transactions of that day. In order for an approval to be obtained or batch out for the day, the terminal has to dial out. A Cent per transaction is charged to the merchant every time the terminal has to dial out. Typically, 18-20 cents (depending on type of business) is charged per dial out.

Monthly Statement Fees are what merchants get charged to receive a monthly report of transactions and discount fees. They receive this statement at the end of every month so that they can tally into their accounting what revenue they've received from bankcards. This is the same statement that ISA's (Independent Sales Agents) review and analyze when consulting with a merchant to convert from the merchant's current ISO. Statement fees are usually between $ 7.50-$ 10 a month (depending on type of business).

Note: You will find these Fees on your Merchant Processing Statement.

About the Author:

Derrick Tulali- Independent Merchant Account Specialist and Owner of Innovative Business Solutions

Articles Source: Merchant Services - Understanding the Rates and Fees Associated With Credit Card Processing

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