Every swipe of a credit card charges the customer the amount they owe. But every swipe of a credit card also charges you interchange fees. In this article, we’ll answer your interchange questions.
What is interchange? How does it work?
What is Interchange?
In credit card processing, interchange is the money transferred from the acquiring bank to the issuing bank for each bankcard transaction. Interchange fees account for the majority of credit card processing costs and are established by the card brands (Visa, MasterCard, Discover) of open-loop processing systems. You can think of interchange as the cost that credit card companies charge businesses to accept their cards. It is unavoidable and every business pays it.
How Interchange Works
When a credit card transaction takes place the issuing bank (cardholder’s bank) pays the acquiring bank (merchant bank) for their cardholder’s purchase minus the interchange fee for the transaction.
Merchants ultimately receive the gross amount of the sale minus a series of base costs and markups that include interchange, dues, assessments, and the processor’s markup.
Interchange is the lowest cost of accepting credit cards, set by the card companies themselves. A lot of companies charge what is referred to as “interchange plus” and add a variable percentage on top of the interchange for each card. With the Fattmerchant subscription model, you’re paying interchange plus zero.
Different Types of Fees
The reality is that you can’t avoid interchange fees. They are universal, and all merchants who accept credit cards must also accept the reality of interchange. What can be avoided are the mark-ups and hidden fees from your credit card processor.
There are some differing factors in the interchange fees you receive such as processing method, transaction data, card type, card brand, and card owner.
- 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 transactions are those where a merchant is able to read a customer’s credit card data electronically. This process is referred to as electronic data capture.
In the case of a card-not-present transaction the cardholder’s information is entered manually by the merchant or provided by the cardholder through a gateway or portal.
- 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.
- Card Type: Separate interchange categories exist for credit and debit 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.
See the major card brands interchange fees below:
The only solution to reducing your credit card processing fees is to eliminate markups and hidden fees and switch to subscription-based pricing through Fattmerchant. Unlike interchange plus or tiered pricing models, subscription-based pricing illustrates upfront that your bill will only consist of:
- Low monthly subscription
- Low cost per transaction based on your subscription
There are no additional costs for our 24/7 customer service, next day funding, or free online reporting, which makes sweating over credit card processing fees a thing of the past. You need processing, but you don’t need the fees. With Fattmerchant, we never profit from your volume — but you do!