One of the byproducts of accepting credit and debit card payments is the financial responsibility retailers assume for the associated charges. For many, fees for card-processing services are among the three highest expenses incurred — next to labor and product costs.
Charges can be hefty, but many can be avoided. By batching early, keeping good records and minimizing EIRFs, retailers can reduce costs each month for needless credit-card processing fees.
Batch Beware
By settling your transactions daily, retailers qualify for the best interchange rates, as long as all other qualifying criteria are met.
Both Visa® and MasterCard® have strict timelines for settling transactions — also known as “batching" — through their systems. In most cases, transactions need to be cleared through the card brands within two days, excluding Sundays and major holidays, to qualify for the most favorable interchange rates.
That means the payment processor has only two days to process a store’s transactions, and forward them to Visa and MasterCard, which, in turn, forward the processed transactions to the issuing bank.
Transactions that don’t meet the two-day time period are “downgraded" to a higher rate — which means you actually pay more for them. If retailers settle accounts only one day late, it can cost you as much as 0.76 percent more per retail transaction for Visa transactions and 0.31 percent more for MasterCard transactions. As more time passes, the fees get higher — as much as 1.16 percent more for Visa and 1.12 percent more for MasterCard. By batching daily, retailers can save yourself the expense and frustration associated with increased interchange rates.
If paying higher interchange rates isn’t reason enough to settle accounts and terminals at the end of each day, a fine from Visa and MasterCard just might be. In fact, if retailers don’t settle your batch within three business days, and consistently send in late transactions, they may face a hefty fine. Visa assesses anywhere from $5,000 to $50,000 or more for violations considered to be repetitive and willful.