What is interchange and how does it affect my processing costs?
All bankcard transaction rates – regardless of who processes the transaction – include a cost for “Interchange.” Interchange rates represent the fees that the VISA and MasterCard Associations charge a Merchant to get the funds into his bank (Merchant Bank) and to get the billing information to the Cardholder’s Bank (Issuing Bank). All interchange rates are expressed as a percentage of the total transaction.
All bankcard transaction rates – regardless of who processes the transaction – include a cost for “Interchange.” Interchange rates represent the fees that the VISA and MasterCard Associations charge a Merchant to get the funds into his bank (Merchant Bank) and to get the billing information to the Cardholder’s Bank (Issuing Bank). All interchange rates are expressed as a percentage of the total transaction. Interchange rates vary by type of merchant or industry (retail, restaurant, hotel, mail order) and in the type of bank card the consumer uses. Starting in 2005, the Associations created a special category or rate for so called “rewards” cards, those that pay dividends to the consumer in the form of merchandise points, hotel stays, or airline miles. The cost of accepting these cards is now somewhat higher for merchants than the standard bankcards.
