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card payment options logo
  • Compare Merchant Services
    • E-Commerce Credit Card Processing
    • Restaurant Point-of-Sale
    • Healthcare Merchant Accounts
    • High-Risk Merchant Services
    • More…
  • Reveal Your Hidden Fees
  • Merchant Account Reviews
Menu
  • Compare Merchant Services
    • E-Commerce Credit Card Processing
    • Restaurant Point-of-Sale
    • Healthcare Merchant Accounts
    • High-Risk Merchant Services
    • More…
  • Reveal Your Hidden Fees
  • Merchant Account Reviews
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Reveal Your Hidden Fees Now

Merchant Account Glossary:

Downgrade Fee Definition

Merchant Account Downgrade Fee Explained:

What is a Downgrade Fee? In the credit card processing industry, a Downgrade Fee is a blanket term used to signify surcharges added to the “Qualified Discount Rate” of the processing fee. In particular, the “Mid-Qualified” and “Non-Qualified” surcharges are the most common Downgrade Fees. However, there is no standard on what a Downgrade Fee must be called, or how it can be applied, and the terminology can vary from provider to provider. Downgrade Fees are often the fees that merchants report as “hidden fees” because they are rarely disclosed before the merchant account activation. Downgrade Fees generally cost merchants an additional 1%-3% per transaction on top of the Qualified processing rate. The fee may be assessed for a variety of reasons including a customer’s card type, issuing bank, how the transaction is entered and other merchant actions. On average, more than 50% of a merchant’s credit card transactions experience Downgrade Fees when set up under the tier/bucket rate pricing model – which is the pricing model that most merchants receive. Downgrade Fees can be eliminated through proper negotiation prior to establishing a merchant account with a provider. To learn how to eliminate them from your processing costs, read Fee Sweep.

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About The Author

Phillip Parker is a Payments Industry Analyst and creator of this blog, CardPaymentOptions.com. Phillip is passionate about researching merchant service providers and payment industry trends. He is often quoted as an expert source in national publications such as INC Magazine, The Los Angeles Times, Entrepreneur, and many others.

“I started this blog because I was disgusted by the business practices of the merchant services industry. I wanted to empower business owners by providing insight on how to avoid shady merchant account providers and costly credit card processing mistakes.” 

Phillip’s Processor Comparisons

Picking a credit card processor can be a headache, but we’ve made it easy. Phillip recommends comparing the best merchant services providers we’ve researched.

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