Many business owners do not realize that the rate their credit card processor quotes them does not apply in all cases.

Visa and Mastercard charge different interchange rates depending on the circumstances of the transaction (for example, they charge more when a rewards card is used).

In cases where the interchange rate is higher than normal, the processor will always pass along the increased rate, this is called a downgrade. However oftentimes the processor will pass on an EVEN HIGHER rate. Since most business owners don't know that they need to negotiate their downgrade rate this additional markup can be quite large.

In fact, in an article in the trade magazine Transactions World, a VP at Global Payments wrote "These 'downgrades'...comprise the majority of the profit...as business owners focused mainly on the “qualified” or best rate."

The best way to avoid getting taken advantage in this way is to insist on an interchange plus processing contract, under which adding an additional markup to downgrades is not allowed. All bids on TransFS are required to be interchange plus.