The Complete Guide to Interchange Fees and Rates

Interchange fees and rates are the fees charged by card issuers to card-accepting merchants for processing card payments. Interchange fees are set by credit card networks such as Visa, Mastercard, American Express, etc., while card issuer rates may vary depending on the issuing bank.

Why are interchange fees and rates important?

As a merchant, it’s important to be aware of the interchange fees and rates that apply to your business, as these can have a significant impact on your overall costs. Accepting credit cards usually comes with associated costs, and being familiar with interchange fees and rates can help you better understand these costs and pricing structures.

What factors into the interchange fee?

There are a few key factors that go into determining the interchange fee for a particular credit card transaction. These include the type of card being used (e.g., Rewards vs. Standard), the cardholder’s country of origin, the merchant category code (MCC) associated with the transaction, and the transaction amount.

What are some of the common interchange fees?

There are a variety of different interchange fees, but some of the more common ones include:

Type of card: Rewards cards typically have higher interchange fees than standard cards.
Cardholder’s country of origin: Interchange fees can vary depending on where the cardholder is located. For example, American Express charges higher interchange fees for cards issued in the United States than for those issued in other countries.
Merchant category code: The MCC associated with a transaction can also impact the interchange fee. For example, transactions processed by businesses in the travel industry typically have higher interchange fees than those processed by retail businesses.
Transaction amount: The total transaction amount can also affect the interchange fee. In general, larger transactions tend to have higher interchange fees than smaller ones.

What are some of the common card issuer rates?

As we mentioned above, card issuer rates may vary depending on the issuing bank. However, some of the more common rates charged by card issuers include:

Transaction fee: A fee charged for each credit card transaction processed. This fee is typically a percentage of the total transaction amount, plus a fixed fee.
Monthly account fee: A monthly fee charged to cover the costs associated with maintaining the account, such as customer service, statement processing, etc.
Annual fee: An annual fee charged for the privilege of using the credit card. This fee is in addition to any other fees that may apply to the account.

What are some tips for managing interchange fees and rates?

There are a few things you can do to help manage the interchange fees and rates associated with your credit card processing:

Know which cards have higher interchange fees: Rewards cards, cards issued in the United States, and cards processed by businesses in certain industries (e.g., travel) typically have higher interchange fees than other types of cards. If you accept these types of cards, you may want to consider passing along the associated costs to your customers through surcharges or other pricing structures.
Know which card issuer rates apply to your account: Card issuer rates can vary depending on the issuing bank. Be sure to review your account agreement so you’re aware of any fees that may apply.
Monitor your account activity: Keeping an eye on your account activity can help you spot any potential issues with interchange fees or rates. If you see anything that doesn’t seem right, be sure to contact your credit card processor or merchant services provider so they can help resolve the issue.
Negotiate your rates: If you’re unhappy with the interchange fees or rates you’re currently being charged, don’t be afraid to negotiate with your credit card processor or merchant services provider. They may be able to offer you a lower rate if you agree to certain terms and conditions (e.g., processing a minimum amount of transactions per month).

The bottom line

Interchange fees and rates are an important part of the credit card processing landscape. By understanding how they work and taking steps to manage them, you can help keep your processing costs under control.