Merit 1 (or Merit I) is a set of Mastercard interchange categories that dictate the rates for certain Mastercard payments.
It’s Mastercard’s way of referring to common “card not present” transactions, meaning online and keyed payments. It applies to several possible card types (including credit, debit, and prepaid) and both rewards and non-rewards cards.
It does not apply to “card present” transactions where you swipe a card through a terminal.
This article gets into finer details of Merit 1, but it may be confusing if you don’t already have a good understanding of interchange. If you’re new to the topic or need a refresher, check out our article on interchange rates and fees for more information.
- Merit 1 Interchange Rates
- Merit 1 Interchange Requirements
- Interchange Downgrades
- Statement Abbreviations
Merit 1 Interchange Rates
As mentioned above, Merit 1 can apply to multiple different types of transactions, which means there are multiple interchange categories with that name. Below, I’ve separated them into two groups: credit, and debit / prepaid.
These rates come directly from Mastercard’s published interchange schedule. Rates and fees subject to change.
There are interchange categories for both basic consumer credit cards (called “core”) and rewards credit cards. You’re probably familiar with rewards cards – it refers to any credit card that produces “rewards” for the cardholder. Rewards include airline miles, points that can be redeemed for specific purposes, and cash back.
Mastercard has one category for Merit 1 core (simply called Merit 1) and four categories for Merit 1 rewards. There are also Merit 1 rates specifically for real estate and consumer loan businesses, but I’ve omitted them as they’re specialty rates that don’t apply to most businesses.
|Volume Rate||Per-Transaction Fee|
|Merit I Enhanced||2.10%||$0.10|
|Merit I World||2.20%||$0.10|
|Merit I World High Value||2.60%||$0.10|
|Merit I World Elite||2.60%||$0.10|
As you can see, the rewards cards incur higher rates than core cards.
Debit and Prepaid Rates
Debit and prepaid cards have their own Merit 1 interchange categories, as follows.
|Volume Rate||Per-Transaction Fee|
|Merit 1 Debit||1.65%||$0.15|
|Merit 1 Prepaid||1.76%||$0.20|
Note that the debit rate applies only to “unregulated” debit cards. That is, to debit cards issued by banks with less than $10 billion in assets. Banks that have more than $10 billion in assets issue “regulated” debit cards, which are subject to a cap on interchange fees.
The current regulated debit cap is set at 0.05% + 22 cents. That’s the most you’ll pay at the interchange level when you accept a regulated debit card. However, your processor can add their own fees on top of the capped interchange rate, so your final cost to accept a regulated debit card will be higher than 0.05% + 22 cents.
Now that we’ve tackled the rates, what are the requirements to actually qualify for Merit 1 interchange? Once again, it varies somewhat by card type.
Merit 1 Interchange Requirements
Every interchange category has specific requirements. Transactions that meet those requirements will “qualify” for that interchange category. For Merit 1, most criteria apply across all categories.
In order to receive Merit 1 interchange rates, a transaction must:
- Be card not present – that is, entered online or keyed in as opposed to swiped
- Pass 1 valid electronic authorization
- Have a matching authorization and settlement merchant category code
- Be settled within 3 days of the transaction date
If a transaction meets those criteria, you can expect it to qualify for Merit 1 interchange. Which specific category will be determined by the card used. Meaning, debit cards will receive debit merit 1, rewards cards will receive the appropriate rewards merit 1, etc.
However, if a transaction does not meet all criteria, it can downgrade to a more expensive interchange category.
In credit card processing a “downgrade” occurs when a transaction falls to a more expensive interchange category. Every transaction has a “target” interchange category for which you can expect it to qualify when everything is done correctly.
However, if everything is not done correctly, and a requirement isn’t met, it will downgrade from the target category. A few downgrades here and there is normal. On the other hand, a lot of downgrades indicates a problem with your processing methods. Additionally, excessive downgrades cost you more.
If you’re seeing a lot of downgrades (usually identifiable by the words “Standard” or various abbreviations like STND) it’s a good idea to look into it. CardFellow members can call us for assistance with downgrades.
Merit 1 rates will show up on processing statements under various abbreviations. Ultimately, your processor controls how they label your interchange categories. In some cases (such as with flat rate pricing) the processor won’t disclose interchange categories to you at all.
However, in situations where you can see interchange detail on your monthly processing statement, you may see Merit 1 listed as:
- MERIT 1 (for core credit)
- ENHMERITI (for enhanced merit 1)
- MCW MERITI (for Mastercard World Merit 1)
- HV Merit1 (for High Value Merit 1)
- MWE MERITI (for Mastercard World Elite Merit 1)
Remember, processors can list interchange by other names as well.
Debit and Prepaid Merit 1 on Statements
For debit and prepaid cards, you may see them listed as:
- Merit 1 D (for Merit 1 debit)
- Merit I PP (for Merit 1 prepaid)
Once again, your processor has discretion to label the categories using other names or abbreviations.