Understanding Interchange Rates

What are interchange rates? Interchange rates are the fees charged between banks for card-based transactions. The fee charged by an interchange rate can differ from one bank to the next. There are three types of interchange rates: high, low and no interchange rate. Learn more about interchange rates and their effects on card usage. These are some things to remember:

Invoice acceptance costs include an interchange charge. Although merchants do not usually need to worry about this fee, some processors will increase their interchange rates. Merchants might not be aware that they are being charged an additional fee. This is because it isn't easily apparent. It is difficult to tell when your card processor has padded their interchange rates without any knowledge of this practice. Here are some tips for avoiding being scammed:

The interchange rate depends on various factors, including the processing method (card present versus card not present), the time between authorization and clearing, the presence or absence of magnetic stripe data, and the merchant's sales volume. Merchants need to research interchange rates in order to choose the best one for them. You can find the Merchant Category Guide to determine which interchange rates apply to you. If you are unsure, you may ask your processor whether they will pad the rates.

Merchants should settle transactions daily as delays could lead to a higher or lower interchange rates. Additionally, merchants should be aware that debit cards have lower interchange rates than credit cards. A $100 purchase using a Visa debit card will cost $0.23, while a credit card would cost $1.51. If the merchant fails to pay their card processors in time, debit cards can cost more than they are worth.

Interchange rates can be set annually. Some companies raise their exchange rates every year. Others don't. American Express, for instance, has reduced its credit-card processing fees since 2018. Both payment networks were forced to delay any increases due to the COVID-19 pandemic. However, there's a chance that both companies will increase the rates in 2022. These changes are important for merchants looking to make more money.

Your best option to reduce interchange rates is to obtain the lowest possible rate. While interchange rates for major credit card networks can vary, it's important that you know your rates before you make any decisions. The interchange fee is the most crucial part of credit-card processing and can easily be optimized. MasterCard and Visa make their rates available twice per year. They make adjustments to their rate schedules to balance costs and benefits.

Merchants must also understand the costs of accepting different types cards. Merchants need to understand interchange fees. These fees make up the bulk portion of merchant processing costs. Understanding these fees will enable you to understand the monthly credit card processing statement. Your costs will go up if you have a higher interchange rate. Interchange rates can vary widely between card types. Understanding these differences will help ensure that you get the best merchant services. To get the best rate, make sure you check your credit card processing charges.

While there are ways to lower your merchant fees, it is best to use a processor that offers interchange-plus pricing to get the lowest interchange rates. Stax offers a monthly subscription for free that doesn't include markup fees. Payment Depot charges $0.15 each transaction. For businesses that process $15k or more per month, however, this is not recommended. These two payment processors are not directly affiliated with each other. Stax is the best option for you if your goal is to avoid high interchange fees.

Merchants need to consider what type of business they are serving, in addition to comparing interchange rate. Merchants who work in high-risk industries should consider using a credit card with a lower interchange rate. To find the best current interchange rate, check the merchant's code. It is important that you get your transactions settled as quickly as possible. Include information about customer service to reduce chargebacks. Scan transactions are better than entering card numbers manually.

Some merchants prefer to use an interchange rate-based payment processor. While American Express and Discover offer their own payment networks, they are somewhat less expensive than Visa or MasterCard. The interchange rates of both Visa and MasterCard mean that interchange fees are added to the overall merchant's processing rate. CardFellow allows you to compare them and see which cards have a lower interchange rate. You might be surprised! It's better if a payment processor offers a free trial period prior to signing up for any service.