Interchange Management

Every merchant wants to know: "How can I save money on credit card processing?" First and foremost it is important you clearly understand where all of your charges are coming from.  The three components of Visa and MasterCard processing pricing in the U.S. are: interchange, assesment, and processing charges.  

Interchange is a fee mandated by Visa and MasterCard, which your acquiring bank pays to the card issuing bank on each sales transaction.  Interchange was developed as an income incentive for banks to issue MasterCard and Visa cards.  Today, there are hundreds of distinct rates based on transaction and industry type.  Interchange typically represents the largest portion of a merchant's total fees. 

Assessments are paid directly to Visa and MasterCard and typically offset the brands' costs to operate and regulate the networks.  These fees are also passed along in some form to the merchant. 

In addition to interchange and assessment fees, payment processors will also charge a processing fee for sponsoring you into the Visa and MasterCard networks. 

Fee Structures. Be sure you understand how your payment processor is structuring your payment processing costs.  Many processors use a bundled "discount" rate, presenting the merchant with a flat percentage rate blending all of the aforementioned fees.  While simple to understand this type of pricing effectively hides the true cost of doing business from the merchant.  Some processors offer a "pass-through" model also known as the "Cost Plus" model, reporting on all of the components as separate fees. While more complex, this style of billing is transparent and essential for reducing downgrades and optimizing interchange.  

For more detailed information on interchange, assessments, and fee structure download our eBook.