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

Visa CPS Retail Rate - Tier II

CPS (Custom Payment Service) Retail is the most common rate qualification for merchants that perform transactions in a face-to-face environment. To qualify for this rate:

• The cardholder, card, merchant and card-reading point-of-sale (POS) device must all be present at the time of the sale.
• The card must be swiped for authorization, and the full, unaltered contents of the magnetic stripe must be sent for authorization.
• Only one authorization is allowed per transaction.
• The transaction must be settled within 24 hours of the transaction date.
• The merchant must obtain an authorized signature on the receipt.
• Restaurant transactions must be settled within 20% of the authorized amount in order to allow for tip adjustments.

(This is the Visa debit card product.)

This transaction must meet all the same CPS Retail requirements as the Tier II transaction. The only difference is that cardholders make the transaction with a Visa-branded check card linked to their bank accounts and not to a credit line such as a standard credit card.

Visa CPS Retail Rate - Tier I - Select Merchants

For a transaction to qualify for this rate, the cardholder must use a Visa-branded credit card to make the purchase, and the transaction must meet all the same CPS Retail criteria as Tier II transactions.

The merchant must meet specific monthly and annual processing volume requirements set by Visa. In a twelve-month period, the merchant must process at least 45 million CPS Retail credit transactions resulting in $1.5 billion in gross sales volume.

MasterCard Merit 3 Rate

Merit 3 is the most common rate qualification for merchants that perform transactions in a face-to-face environment. To qualify for this rate:

• The cardholder, card, merchant and card-reading POS device must be present at the time of the sale.
• The card must be swiped for authorization, and the full, unaltered contents of the magnetic stripe must be sent for authorization.
• Only one authorization is allowed per transaction, and the transaction must be settled within 24 hours of the transaction date.
• The merchant must obtain an authorized signature on the receipt.
• Restaurant transactions must be within 25% of the authorized amount; all other transactions must be within 10% of the authorized amount.
• Hotel and Car Rental transactions where the magnetic stripe was read and where the required T&E (Travel and Entertainment) data (check-in/check-out date, folio number, etc.) will qualify if settled within 24 hours of the transaction date, which is also the check out date.