Merchant Interchange Questions and Answers
What is Interchange?
Interchange is the largest component of the costs to accept card payments; is set by MasterCard and Visa; and is paid to the card issuing banks. Each card issuing bank collects Interchange fees based on how many cards they issue and how often these cards are used to make purchases. Interchange rates and fees are the same for all bank processors and service providers. Read more About Interchange.
How are Interchange rates and fees set?
Interchange is priced at the transaction level and depends on the combination of:
- the card type (MasterCard differs from Visa)
- the industry category (by merchant category code)
- the card product accepted (debit, credit, rewards, signature, business, corporate, purchasing, international)
- the method of acceptance (swiped, keyed)
- the transaction size (less than $15, or large ticket over $4105)
- the registration requirements (special program incentives for meeting certain criteria)
- the qualification edits (amount of data submitted, data matching)
- the new Federal Reserve regulations
What is Fed Regulated Debit Interchange?
Regulated refers to the government regulations under the Dodd-Frank financial reform bill which contained the Durbin Amendment which instructed the Federal Reserve to regulate debit card Interchange rates. October 1, 2011 these rules went into effect and created Regulated Debit, Regulated Debit with Fraud Adjustment, and exempt debit transaction rate categories. The new Fed regulated debit Interchange forced the addition of these new debit rates to be determined by the size of the cardholder’s bank issuing the debit card. Small banks, with less than $10 billion in assets, were exempt so their debit Interchange rates remained unchanged while debit Interchange regulations were applied to the largest banks issuing debit cards, with assets are over $10 billion. Exemptions were also made for certain Prepaid debit card products.
Do MasterCard and Visa publish their Interchange rates?
Yes, both Visa and MasterCard publish their Interchange rates.
- Visa USA Interchange rates are published at http://usa.visa.com/merchants/operations/interchange_rates.html
- MasterCard Interchange rates are published at http://www.mastercard.com/us/merchant/how_works/interchange_rates.html
What are Dues, Assessments & Access fees?
These rates and transaction fees are paid to the card company brands like MasterCard, Visa and Discover. The money they earn from these fees is reflected in the stock price of these publically traded companies whose responsibilities include card branding campaigns; R&D into new payment services and payment security; governance of the rules and regulations between card issuing and merchant acquiring banks; and growth and maintenance of their payment technologies and networks. Dues, assessments and access fees are priced the same for all bank processors and service providers.
Why do I want an Interchange and Assessment pass-through pricing schedule for my merchant account?
The best merchant account rates are only available by passing through Interchange and Assessment fees at cost. The transparency of Interchange with a mark up to cover the merchant services delivery costs of processing transactions, risk management, customer service, account funding and reporting is your best pricing method. Incentive Interchange rates are available for a number of industries. Examples include supermarkets, schools, non-profits, restaurants, B2B and more and managing Interchange qualifications requires an Interchange pricing plan. Identifying merchant service providers that simply pass through Interchange will make it easier to compare rate quotes.
Are all Interchange and Assessment pass-through pricing plans the same?
No. For example, a comparison of merchant account provider fee schedules finds differences in the mark up over Interchange. Some service providers escalate fees on a tiered mark up schedule by defining some Interchange categories as non-qualified. Merchants should only entertain quotes where the mark up over Interchange is the same for all Interchange categories. Also, make sure credit voucher Interchange is refunded when you issue cardholder credits. Other differences include billing on authorized verses settled transactions, expensive fee schedules and long-term contracts with cancellation penalties.