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HOW IS BASIS POINT CALCULATED IN
MERCHANT ACCOUNT?
A percentage of
amounts are charged to the merchants for
processing the credit card. The
percentage varies according to the
different type of card. Different credit
cards have different logos on them. The
master card, Visa, Visa Electron, etc
are some of the examples of such logos
of the credit card issuing companies.
Basis Point refers to the percentage of
amount or money which the bank provides
to the merchant for processing the
credit cards. The term Basis point is
calculated in percentages so it is
complicated. Certain discounts are given
to the merchant account holders who
process maximum credit cards daily. The
merchant has to pay a certain amount to
the bank for processing of the credit
cards.
In every
transaction where the credit card is
processed, 0.01 % is imposed as a
transaction amount. Some merchants incur
a high rate whereas some might get a low
rate. There are many formalities to be
completed by the merchant before the
bank while applying for a merchant
account. Each merchant has to pass the
eligibility criteria to get these
services. The merchant has to decide and
choose what type of business he carries
on in the future. If a merchant
qualifies and applies for higher basis
points and at the same time if his
business is slow then he is the sole
sufferer.
The surcharge of
the merchant which is required for the
qualification has three important
levels. The 1st level or the
qualified rate gives 1.69 % to the
merchant account holder or 169 in terms
of basis points. In the same manner,
there are mid-qualified and
non–qualified levels also. The merchants
holding such account are paid 0.3% and 1
% or 30 basis points and 100 basis
points respectively. The discounts which
are offered to the merchant account
holders make a compromising difference
while summarising the account. Rather
than calculating the basis points in
terms of percentages, it is easier to
calculate on the basis points. For
instance: 30 basis points = 0.3 % or 1 %
= 100 basis points.
When the amount is
calculated on weekly or monthly basis,
these basis points show a decimal value.
The basis points are not calculated on a
daily basis but it is calculated at the
end of a month. By looking at the
transaction statements of a merchant, it
can be clearly noted which merchant uses
which qualification of basis points. A
fixed amount of the basis point is
charged to the merchant account holder
for processing every credit card. The
merchant who has qualified for the basis
point is given the first preference then
comes the mid–qualified followed by the
non–qualified. The bank also provides an
exchange to the merchant account holders
which means, only if a merchant has
processed a maximum number of credit
cards within a certain period of time,
then that merchant gets a high rate of
surcharge from the bank. Sometimes, the
percentage rises up to 33 % which is
very beneficial for the merchant account
holders. |
