In credit card processing, interchange downgrades occur when a transaction doesn’t qualify for an interchange category for which it should have been eligible. Downgrades can occur for a number of reasons, which we’ll explore in this article.
However, it’s worth noting that in limited circumstances, an EIRF category is the best possible category for which a transaction can qualify. This primarily affects businesses in the Travel and Entertainment (T&E) industries. We’ll also take a look at how it applies to T&E.
- EIRF Interchange Rates
- Interchange Basics
- What causes downgrades?
- Consumer Credit EIRF Interchange
- Consumer Debit EIRF Interchange
- Consumer Prepaid EIRF Interchange
- Target Interchange Categories that Downgrade to EIRF
- EIRF on Credit Card Statements
- Downgrade Reports
EIRF Interchange Rates
These interchange categories and rates apply to three types of consumer cards: credit cards, debit cards, and prepaid cards. There are two EIRF categories for credit and debit cards, and one for prepaid cards, as follows.
|Signature Card Electronic
|EIRF Debit Reg
These rates are pulled directly from Visa’s published interchange table. Rates are subject to change at Visa’s discretion.
To understand when and why these rates apply, we first need to discuss interchange fees in general.
Interchange downgrades are a more advanced topic in credit card processing. If you aren’t familiar with interchange, it’s a good idea to take a moment to read our article about how interchange fees work. For a quick refresher, interchange makes up the bulk of the costs to accept a credit card. It goes to the banks that issue cards.
There are hundreds of interchange categories, all with their own criteria for eligibility and associated rates. Every transaction you process will be charged according to the interchange category for which it met requirements.
Every card has a “target” interchange category. That is, the interchange category that you can expect the transaction to fall under if everything is done correctly. When everything is not done correctly and the transaction fails to meet the criteria for the target interchange category, it will “downgrade” to a more expensive category. In many cases, that means it will fall to “EIRF.”
As with most things at interchange, there are multiple classes of EIRF. It can apply to consumer credit cards, consumer debit cards, and consumer prepaid cards. However, it does not apply to commercial transactions / corporate credit cards, which have separate categories.
In most cases, “EIRF” is a downgrade category, meaning your transactions missed target interchange and were instead “penalized” (downgraded) to the EIRF interchange rate.
What causes downgrades?
There are a number of things that can cause downgrades. Some common reasons include:
- Not settling in the required timeframe
- Not using Address Verification System (AVS)
- Authorization amount not matching settlement amount
However, this is not an exhaustive list.
Every target interchange category has a set of criteria that a transaction must meet in order to qualify for that category. If the transaction doesn’t meet every requirement, it will downgrade.
However, EIRF categories themselves also have specific criteria.
Consumer Credit EIRF Interchange
There are two electronic interchange reimbursement fee categories in the “consumer credit cards” category. They are Electronic Interchange Reimbursement Fee and Signature Card Electronic. However, one of them is not a downgrade for some business types.
Electronic Interchange Reimbursement Fee
Also known as EIRF
Interchange Rate: 2.30% + 10 cents per transaction.
This category is a downgrade for most businesses. When a transaction meets the following criteria, it will typically receive EIRF classification and rates.
- Card-present or key entered
- Electronic authorization
- Settled within two days
For this category, you run the card through a machine (swiping, tapping, or dipping) or hand key the card details and obtain the customer’s signature. You must also obtain and pass one valid electronic authorization. Lastly, you must settle the transaction within two days of the original authorization.
If you don’t meet these requirements, the transaction can downgrade to the “Standard” interchange category.
Signature Card Electronic
Also known as SIGN EIRF
Interchange rate: 2.30% + 10 cents per transaction
While signature card electronic has the same rate as the basic EIRF category, it’s not technically a downgrade for certain business types. (Specifically, for businesses in the Travel and Entertainment industries.) You’ll receive Signature Card Electronic interchange rates when a transaction meets the following criteria.
- Transaction uses a rewards credit card
- Business has an eligible T&E merchant category code (MCC)
- Transaction qualifies for a CPS program
The first point means that this interchange category does not apply to basic consumer credit cards. (I.e., non-rewards cards.) It will only apply to certain cards that produce “rewards” for the cardholder, like airline miles or cash back.
The second point relates to the actual business from which the cardholder makes a purchase. The transaction must take place with an eligible T&E business. For the purposes of SIGN EIRF, the eligible business types include:
- Airlines (300, 3299, 4511)
- Car or truck rentals (3351, 3441, 7512, 7513
- Cruises (4411)
- Hotels (3501, 3833, 7011)
- Railroads (4112)
- Restaurants (5812, 5814)
- Travel agents (4722)
This list does not include all possible T&E merchant category codes.
Lastly, the transaction must meet criteria for a Visa CPS program. The transaction must be “qualified” for CPS Restaurant, E-commerce Basic, Card Not Present, Retail Key Entered, Car Rental, Hotel, or Passenger Transport.
Consumer Debit EIRF Interchange
Technically, there are two EIRF Debit categories. However, one of them is simply the “regulated debit” version of the other. Interchange fees for “regulated” debit cards (cards issued by banks with $10 billion or more in assets) are capped by law. Thus, the EIRF Debit Reg category has the same criteria as EIRF Debit with the sole exception of the card used.
An unregulated debit card that meets the criteria will receive EIRF Debit interchange. A regulated debit card that meets the same criteria will receive EIRF Debit Reg interchange.
Also known as EIRF D
Interchange rate: 1.75% + 20 cents per transaction.
A Visa debit card that didn’t hit target debit interchange but meets the following criteria will typically qualify:
- Transaction settled within 2 days of authorization
- Card present transaction or, if keyed, signature obtained
- Obtain and pass one valid electronic authorization
EIRF Debit Reg
Also known as EIRF D R
Interchange rate: 0.05% + 22 cents per transaction.
This category has the same criteria as the EIRF Debit category (above) with the exception of the card used. When the transaction involves a regulated debit card and meets the rest of the criteria above, it will fall under this category.
Consumer Prepaid EIRF Interchange
Also known as EIRF PP
Interchange rate: 1.80% + 20 cents per transaction.
Transactions will fall to the EIRF Prepaid interchange category when they fail to meet all of the requirements for target prepaid interchange, but do meet the following criteria.
- Obtain (and pass) 1 valid electronic authorization
- Settle within 2 days of the transaction date
- Use magstripe, chip, or tap to terminal OR key enter card details and obtain customer’s signature
If the transaction fails to meet these criteria, it may downgrade further.
Target Interchange Categories that Downgrade to EIRF
There are many interchange categories that can downgrade to EIRF. In fact, almost every consumer card interchange category could, if requirements aren’t met. A few EIRFs on occasion is nothing to worry about. However, if you’re seeing a high amount of downgrades, it’s worth investigating.
Is EIRF the lowest possible downgrade?
No. Beyond EIRF is another downgrade category, called Standard. Transactions can downgrade from EIRF to Standard if criteria for the EIRF category aren’t met.
EIRF on Credit Card Statements
While you’ll see “EIRF” interchange categories on your monthly processing statement, unfortunately you won’t be able to tell which categories downgraded or why. Several different transactions may simply be lumped under the one downgrade category.
To determine what caused the downgrades (and what you would have paid) you’d need to review your business downgrade report.
Identifying and diagnosing interchange downgrades can be time-consuming and complex. However, if you really want to dig into it, you can request downgrade reports from your credit card processor. These reports will show what type of card was used and what criteria was missed that disqualified it from target interchange. From there, you can formulate a plan to correct any problems in your card acceptance process for future transactions.
If you’re a CardFellow member, you don’t need to do this yourself. As part of your membership, you can request statement audits. One of our processing experts will go through your statement to check for any discrepancies, downgrades, or other issues and help you resolve them. You can rest easy knowing that we’re checking your transactions to ensure that you’ll pay as little as possible for processing. Simply sign in to your CardFellow dashboard or give us a call for assistance.
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