Interchange fees account for the majority of credit card processing expense, and a familiarity with interchange is vital knowledge for any business owner or manager. Interchange is the cost of the money transferred from the acquiring bank to the issuing bank for each bankcard transaction. These interchange fees are established by the card brands (Visa, MasterCard, Discover, JCB, Union Pay).
Interchange fees for the two largest card brands may change twice annually in April and October. The interchange fee schedules for Visa and MasterCard can be found here:
Here is an infographic from the Strawhecker Group that illustrates an explanation of what merchants pay to accept credit cards, why it’s paid, and the benefits provided to merchants and consumers:
At BCMS, we guarantee the lowest processing rates in the industry, so you never have to worry if you’re paying too much for processing. We offer a cost-plus pricing structure which is the basic interchange rate plus a few basis points to cover our services. To lessen the impact of interchange fees, you may follow this guide:
A number of factors are used to determine where a transaction qualifies at interchange. Some of these factors can be controlled or influenced by the merchant while others can’t.
Factors that merchants can influence include:
- Processing method: Card-present and card-not-present are the terms used to generally refer to the different ways of processing a credit card transaction. Card-present interchange categories carry smaller fees than card-not-present categories.
- Card-Present: Card-present transactions are those where a merchant actually swipes a card through a terminal or by an imprinted and signed credit card draft.
- Card-Not-Present: Card-not-present transactions (CNP, MO/TO, Mail Order / Telephone Order, MOTOEC) are made where the cardholder is not physically present with the card at the time that the payment is effected. This situation is most common for internet, mail-order, or fax transactions and is a major route for credit card fraud.
- Transaction data: The information supplied with a credit card transaction impacts how it qualifies at interchange. Proper and complete transaction data is especially important for merchants that process card-not-present transactions and for those that deal with corporate and government enhanced data.
- Merchant Category Code: Specific interchange categories exist for businesses that fall under a certain merchant category code (MCC) designations.
Interchange qualification factors that a merchant can’t control include:
- Card Type: Separate interchange categories exist for credit and debit card charges.
- Card Brand: The brand of a bankcard will impact interchange qualification. This criterion is typically associated with credit cards that yield some type of reward for the cardholder.
- Card Owner: Whether a credit or debit card is issued to an individual, business, corporation or municipal agency impacts interchange qualification.
The extent to which interchange can be optimized for your business depends on several variables. To learn more about interchange fees, please contact us today.