09/20/2011

Avoiding Visa’s Most Costly Downgrade

Have you ever seen “Electronic Interchange Reimbursement Fee” (EIRF) marked next to a transaction on your statements? Many of us see the word reimbursement and get excited. It sounds like we’re getting money back, doesn’t it? Well, we hate to break it to you, but that is not the case.

EIRF is actually an interchange surcharge that Visa adds for certain downgraded transactions. (As if a card brand would actually reimburse a merchant, right?) In reality, EIRF increases your discount rate somewhere between .45% and .76%, with the exact amount depending on your merchant type and other factors.

You can avoid these costly downgrades by:

Settling your batches nightly. If you take more than 48 hours to settle a transaction, it will default to EIRF.
Getting all the necessary AVS information. Especially in e-commerce or MO/TO environments, it is vital to get all the required address verification and CVV2 codes and to ensure they are entered into your system correctly. Missing information results in EIRF charges.
Ensuring your final settled amount matches the authorization. While it is possible to use your original authorization even if the final dollar amount decreases, clerks should know that this activity will result in the transactions being downgraded to EIRF. It’s wise to always request a new authorization code if the dollar amount changes. (NOTE: Merchant types that generally accept tips or process incremental authorizations, such as F&B or Hospitality, are typically exempted from this requirement.)

Implementing these few tips will help your organization avoid the costliest of Visa’s downgrades. The tips will also prevent many Standard Electronic Interchange Reimbursement Fee (SEIRF) interchange downgrades, which are charged by both MasterCard and Visa, and can add as much as 3% to your rate.

Shift4’s resolute independence gives us the freedom to share this information with you. We don’t profit from your downgrades, and we have no financial ties to banks, processors, or card brands that do. We’re merchant advocates, and that means we only succeed when you do.