Understanding Interchange


Interchange-Fees

One of the primary merchant expenses associated with credit and debit card acceptance are interchange fees. Usually these are fees that a merchant’s acquirer or merchant services provider pays to card-issuing banks. Other costs to the acquirer include processing fees (paid to the processor for running the transactions and settling funds), as well as assessments and association fees (paid to Visa, MasterCard and Discover).

The interchange category under which any single transaction falls will depend on various factors, including the card type used by your customers, for example standard or premium cards, and the means by which you accept the transactions, such as chip and PIN or over the phone or internet.

The fees are calculated as a percentage of each transaction or as a fixed amount. As a general rule, for more premium card types the interchange fee is higher than those for standard cards. Likewise, fees are typically lower where the transaction is conducted face to face rather than when the card is not present, for example over the phone or internet, as the risk of fraud is higher. You can see the effects here in the following chart:

Visa Card Type
Swipe/PIN/Tap
Manual Entry
E-commerce / Virtual Terminal
Consumer
1.54%
1.65%
1.65%
Premium
1.74%
1.85%
1.85%
Corporate
1.90%
2.00%
2.00%

 

MC Card Type
Swipe/PIN/Tap
Manual Entry
E-commerce / Virtual Terminal
Consumer
1.59%
1.72%
1.72%
Premium
2.00%
2.13%
2.13%
Corporate
2.25%
2.65%
2.65%

interchange

Example: Visa Interchange

When Visa customers use a personal non-chip credit card in a retail storefront, the interchange rate is 1.54%. If that same customer purchased online with the same card, the interchange rate would be 0.11% higher or 1.65%. If the customer came back a third time and used an Infinite card, the rate would be 1.74%. So, as you can see, the environment and type of card play a part in the cost of the transaction. 

When paired with the proper equipment merchant can ensure their Recurring Payments are categorized as a “qualified” transaction, saving 0.11% vs traditional processing methods.

Example: MasterCard Interchange

The interchange rate for MasterCard is 1.59% for card present transactions. However, if your card is considered Highspend and your transaction is non face-face your interchange increases by 0.54%.

Speak to you Merchant Advisor to assess your current card breakdown and to search for card efficiencies in your payment structure.