Merchant Account Basis Points, Discount Rate, and Interchange

We have had several questions regarding basis points today at the PaymentMax office. What they are? and how to figure to them out. So, I decided to revisit an article I wrote back in September 2010, “What are Merchant Account Basis Points?”

• Basis points are equal to the discount rate on a merchant account.

• Basis points are represented by a whole number to eliminate decimal and fraction expressions.

• A basis point equals 1/100th of 1% (or 0.01%).

For example, if you have 159 basis points than the qualified rate would be 1.59%.

• The qualifed rate will have the highest basis points because the mid-qualified and non-qualified rates are actually surcharges on top of the qualified rate.

For example, if your qualified rate is 150 basis points (1.50%) and your mid-qualified rate is 30 basis points than your total basis points will be 150 + 30=180 basis points, or 1.80%. Similarly, if your non-qualifed surcharge is 1% (100 basis points) than the total basis points for a non-qualifed transaction is 250 (2.50%).

• Basis points are determined by card associations (also known as interchange) and merchant account provider fees. Interchange is what merchant account providers pay to card associations for processing merchant’s transactions. The current interchange rate is available on card associations websites.

For example, if interchange is 148 basis points (1.48%) and your merchant account provider’s fees are 20 basis points than the total discount rate would be 168 basis points (1.68%)

For more information on merchant account basis points, rates, fees, or next day funding visit www.paymentmax.com.