Avoiding Downgrades

A downgrade is a term that refers to a processed transaction being assessed a higher processing fee above the base default rate for a particular type of card. Many downgrades are unavoidable, such as when a customer pulls out their rewards card instead of their debit card. A rewards card rate is a slightly more expensive rate, and its going to be charged regardless of what the business owner does because they cannot change the fact that the card is a rewards card. However, some downgrades are in the control of the business owner. AGMS refers to these types of downgrades as "avoidable downgrades".

An avoidable downgrade is one that occurs due to circumstances that are completely within the business owner’s control and would have been avoided if only one or more aspects of how the transaction were processed were done differently. With over a decade's worth of experience deeply analyzing and monitoring billions of dollars of processed sales data, AGMS has developed a unique expertise when it comes to identifying, correcting, and preventing downgrades for our clients.

All new AGMS client accounts undergo repeated verification and audit procedures to ensure that all account setup, business classification, and processor flags are configured in the specific manner that results in the optimal processing qualifications for many key attributes of a specific business. AGMS then continues to monitor each and every account on a continual basis with automated flags alerting our internal research teams if there is an issue. Many times, issues are caught and corrected with the only notification to the business owner being a refund on the following month. Other times, we've identified new configuration issues caused by a routine software update by a POS System vendor which results in transactions coming in improperly. In one instance alone, AGMS saved a business over $45,000 per year in excess fees they didn't realize they were paying by assisting their systems vendor to correct a configuration issue!

Avoiding downgrades can be very client-specific, but the following are simple things that can be done as a business or developer to avoid the worst pitfalls of avoidable downgrades:

  1. Always capture and settle a transaction within 48 hours of its authorization, ideally within 24 hours.
  2. For key-entered and ecommerce transactions, always provide a billing zip code.
  3. For key-entered and ecommerce transactions, always provide an invoice number.
  4. If using a terminal or POS system, never skip a prompt for additional information like a customer code or PO number. Sometimes this information is irrelevant, other times it could have a major impact on fees assessed.
  5. Keep processing equipment relatively up-to-date. If software hasn't been touched for 3-5 years or longer, or if the hardware itself is more than a decade old, simply upgrading to modern software and hardware that speaks current protocols properly could lead to a major positive impact.
  6. Make sure that the authorization amount matches the captured amount.
  7. One authorization per capture, though one reversal is permitted to make the total authorized amount match the final amount.
  8. Have a valid, non-expired authorization for the capture. Never force-capture an amount without an authorization.