Don’t Overlook Merchant Rate Savings from Cardholder Returns

Does your business provide a generous return policy?  If you do, one way to lower your bottom line costs of accepting credit and debit card payments is to look at your costs to process cardholder credits.

When your customer pays by card, merchants pay a discount rate to process the sale transaction.  For example, if during the month, you make $1,000 in sales that ultimately result in the cardholder making a return and you issue offsetting credits for $1,000, what has it cost you?  Assuming a 2% discount rate in our example, that’s $20 in fees. 

From our daily analysis of merchant statements, the most common thing we see is that merchants pay for processing the sales and on cardholder credits no discount rate is applied.  This is the case above; the merchant pays $20 to process the $1,000 in cardholder sales and credits.  The most egregious pricing plans apply the discount to the credit amounts too.  In this scenario, the merchant pays $20 to process the original sales and another $20 to process the credits for a total of $40 in fees. 

What can merchants do to save money and lower their bottom line costs of processing cardholder credits?  Change to direct Interchange pass through billing with a Vantage merchant account.  Interchange is the largest component of the merchant discount rate and MasterCard, Visa and Discover all offer Credit Voucher Interchange.  Credit Voucher Interchange is returned to the merchant when credits are processed.   In our example, most of the cost of processing the original sale is returned.  Instead of spending $20 or $40 to process the cardholder credits, it may only cost $3, for a savings of $17 to $37 per $1,000 in return volume. 

Merchants should check their merchant processing statements, calculate their annual cardholder return volume and identify how they are billed for processing cardholder returns. Don’t leave savings from Credit Voucher Interchange on the table.  For the best value in merchant services, turn to Vantage Card Services, with a month-to-month, direct Interchange processing agreement and Vantage Points rewards.  Get a quote now at

by Ty Hardison

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