What are card brand fees? A Detailed Guide to Interchange Rates
Card brand fees are the charges assessed by credit card companies like Visa, Mastercard, and Discover. They are also known as interchange rates. These fees are a percentage of the total transaction amount, and they vary depending on the type of card used and the merchant’s processing method.
Card brand fees are not charged by the credit card issuer, but they are passed on to the merchant through the acquirer. The acquirer is the financial institution that processes credit card payments for the merchant.
There are four different types of card brand fees:
- Interchange rates – These are set by the credit card companies and vary depending on the type of card used.
- Assessment fees – These are also set by the credit card companies and are a flat fee per transaction.
- Network fees – These are charged by the card networks (e.g. Visa, Mastercard) and are a percentage of the transaction amount.
- Acquirer fees – These are charged by the acquirer and are a percentage of the transaction amount.
The total card brand fee is a combination of all four of these fees. For example, if the interchange rate is 1.5% and the assessment fee is $0.10, the network fee is 0.05%, and the acquirer fee is 0.30%, then the total card brand fee would be 2.35%.
Most merchants are charged a flat-rate card brand fee, which is a combination of the interchange rate and the assessment fee. The network and acquirer fees are typically bundled into this flat-rate fee. For example, if the interchange rate is 1.5% and the assessment fee is $0.10, the flat-rate card brand fee would be 1.60%.
The card brand fees are collected by the acquirer and passed on to the merchant. They are not charged by the credit card issuer.
Card brand fees are typically a small percentage of the total transaction amount, but they can add up to a significant amount for merchants with a high volume of sales. For example, a merchant who processes $1 million in credit card sales per year would pay $23,500 in card brand fees at a 2.35% rate.
Merchants can get a discount on their card brand fees by negotiating with their acquirer or by switching to a different acquirer.
Card brand fees are just one of many types of fees that merchants have to pay when they accept credit cards. Other fees include transaction fees, statement fees, and annual fees. Merchants should carefully review their credit card processing statements to ensure that they are being charged the correct amount in fees.
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