The largest component of most credit card processing statements is interchange.

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Interchange fees are the fees paid to the banks that issue Visa and Mastercard cards for providing access to cardholder funds and assuming the risk associated with advancing payment to merchants before receiving reimbursement from the cardholder.

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Note: Discover operates differently. Because Discover does not rely on separate issuing banks in the same way Visa and Mastercard do, Discover itself receives interchange fees on Discover card transactions.

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Many businesses are surprised to learn that interchange rates are not secret. They are publicly available through the card brands’ published rate schedules.

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The question is not whether interchange exists. The question is whether your transactions are being processed in a way that qualifies for the most appropriate interchange categories.

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So what determines the interchange rate for a specific transaction?

Several factors come into play:

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Industry Type

Different industries qualify for different interchange categories, including:

• Retail

• Restaurant

• Supermarket

• Utilities

• eCommerce

• Automated fuel dispensers (pay-at-the-pump)

• Hotel and lodging

• Business-to-business transactions

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Type of Card

The card presented can significantly impact the interchange cost:

• Debit card

• Credit card

• Rewards card (such as airline miles or points)

• Signature card

• Corporate card

• Purchasing card

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Card Benefits

Cards offering enhanced benefits typically carry higher interchange costs.

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How the Card Data Is Captured

The method used to process the transaction matters:

Card-present transactions

• EMV chip (“dipped”)

• Magnetic stripe (“swiped”)

• Contactless payments (such as Apple Pay)

Card-not-present transactions

• Manually entered card information

• Online transactions

 

​Data Submission

Was all required transaction data properly submitted?

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Even small differences in how transaction information is captured and submitted can determine whether a transaction qualifies for a lower or higher interchange category.

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Historically, businesses have viewed interchange fees, card brand assessments, dues, and related fees as fixed costs—while viewing the merchant services provider’s markup as the variable cost.

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This assumption has created a problem.

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It has turned merchant services into a commodity, where providers appear identical and the only difference seems to be price.

So when a merchant services provider promises “a better rate,” what they are often reducing is their own markup—the portion of the fees they control.

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The challenge is that the provider’s markup is frequently the smallest portion of your total processing costs.

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Many businesses spend significant time negotiating pennies while overlooking the dollars.

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At SoBoNet, we help businesses focus on where the greatest opportunity exists: understanding and optimizing the largest component of their processing expenses—the fees paid to card-issuing banks.

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By understanding interchange, you gain the knowledge needed to identify opportunities for meaningful savings rather than simply accepting whatever pricing structure is presented.

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Knowledge creates control.

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(Click on each card brand logo below to view published interchange rates.)