his is the second in a series of articles written in response to numerous reader requests for definitions of interchange levels. We are working with several industry experts to explain the interchange "buckets" and how transactions are assigned to the processing levels. In this installment, we will discuss the definitions of the buckets exclusive of the interchange rates. For the most current rates, please refer to the table distributed with the August 25, 2003 issue of The Green Sheet.

Supermarket Rates

Both Visa and MasterCard have special reduced-rate interchange programs in place to entice supermarkets to accept credit and check cards at the POS. The supermarket industry convinced the associations that grocery store profit margins were too slim to afford the same interchange rates applied to retail merchants.

Visa CPS Supermarket Check Card Rate

For a transaction to qualify for this rate, a Visa-branded check card must be used to make the purchase. The Merchant Category Code (MCC) for the location must be 5411, the transaction must meet all the Visa Custom Payment Service (CPS) Retail requirements and the merchant has to have been pre-approved by Visa to participate in the program. To be certified by Visa, the merchant must sign a form available from the acquiring bank. The merchant must meet the following requirements:

• Be a retail store primarily engaged in selling food for home preparation and consumption
• Offer a complete line of food merchandise, including self-service groceries, meat, produce and dairy products
• Have monthly perishables (defined as packaged and in-store bakery goods, dairy products, delicatessen products, floral items, frozen foods, meat and produce) representing at least 45% of total monthly sales
• Accept credit cards for purchase of all goods and services sold in the store at all check out lanes that accept checks

Once the form is completed and sent to Visa through the acquirer, it can take four to eight weeks for an approval. Once the approval is granted, work with the acquirer and/or processor to ensure the merchant is set up to correctly process as a SIP merchant.

Visa CPS Supermarket Tier II Rate

For a transaction to qualify for this rate, a Visa-branded credit card must be used to make the purchase. The MCC for the location must be 5411, and the transaction must meet all the Visa CPS Retail requirements. This rate replaces what used to be known as CPS Supermarket Credit Card.

Visa CPS Supermarket Tier I Rate - Select Merchant

For a transaction to qualify for this rate, a Visa-branded credit card must be used to make the purchase. The MCC for the location must be 5411, and the transaction must meet all the Visa CPS Retail requirements.

The merchant must also meet specific monthly processing volume requirements. For a 12-month period, the merchant must have processed at least 24 million transactions resulting in $1 billion in gross sales volume.

MasterCard Supermarket Rate - Debit (Offline) and Credit

For a transaction to qualify for this rate, it will depend on whether a credit card or check card (offline debit) was used to make the purchase. The MCC for the location must be 5411. The transaction must meet all the Merit III requirements, and the merchant must be pre-approved by MasterCard to participate in the program.

To be certified by MasterCard, the acquiring bank must submit the proper form to MasterCard on the merchant's behalf. The merchant must meet the following requirements:

• Be a retail store primarily engaged in selling food for home preparation and consumption
• Offer a complete line of food merchandise, including self-service groceries, meat, produce and dairy products
• Have monthly perishables (defined as packaged and in-store bakery goods, dairy products, delicatessen products, floral items, frozen foods, meat and produce) representing at least 45% of total monthly sales
• Accept credit cards for purchase of all goods and services sold in the store at all check out lanes that accept checks