Discussions about pricing are a huge part of setting up a merchant account in preparation for accepting credit and debit cards. And it’s not unusual for merchants to scratch their heads over how the rate they will need to pay for each transaction processed is determined.

Essentially, per-transaction pricing is based on the risk involved in the particular type of transaction(s) you are executing. The greater the risk, the higher the per-transaction rate you must prepare to pay. The lowest possible rate you will incur when accepting a credit card is called the “qualified rate”, and it applies primarily to transactions in which the card is present or has been swiped through a magnetic stripe reader rather having had its number key-entered into the POS system. Telephone and e-commerce transactions do not qualify for this rate because they are unable to swipe credit cards.

The second-lowest rate, called the “mid-qualified” or “partially qualified” rate, is the percentage you will be charged if you accept a credit card whose number is key-entered into the POS system. This rate also applies to transactions completed online and is the best rate available to retailers transacting business via Web site or by telephone.

“Non-qualified”, the highest percentage rate, is charged for transactions that pose the greatest risk. Transactions completed with rewards or business credit cards fall into this category, as do those for which customer address verification is not performed. Merchants that do not settle their daily batches within the allotted time are subject to this rate as well.