What are credit card interchange fees for small businesses?

If you’ve looked at your credit card processing statement recently, you’ve probably seen a reference to “interchange fees.” You’ve probably wondered what this means and how you can reduce these fees. After all, no one likes to pay high credit card processing rates. While you can’t eliminate interchange fees entirely, there are a few ways to keep them as low as possible. 

Defining Interchange Fees

First things first – what are interchange fees, anyway? Interchange fees refer to the base credit card processing fees set by the major card networks. It’s the cost of doing business to accept credit cards – there’s no way to get around it. At the risk of getting too jargon-y, interchange fees were historically used to compensate banks for the interest they lost while they waited for consumers to settle their monthly credit card bills. Today, the purpose is simply to keep the balance between the cardholder’s bank and the merchant’s bank, so each side is fairly compensated and therefore willing to continue paying with/accepting credit cards in the future. You can read more about Visa and MasterCard’s interchange fees here and here.

How You Can Affect Interchange Fees

Want to keep your interchange fees as low as possible? Of course you do! Fortunately, there are a few steps you can take to ensure this happens. First and foremost, dip or swipe as many cards as possible, rather than manually keying in their data. Card present interchange fees are generally lower than card not present fees due to the decreased risk of fraud. If the customer has the card in hand, there is a lower chance that it’s been stolen or otherwise misused. If you need to key in most of your card data, don’t despair. Make sure you enter all the required information for a transaction, including any data required to qualify for applicable Level 2 or 3 rates. Finally, your merchant category code (MCC) can also affect your interchange fees. Check with your credit card processor for more details.

Things You Can’t Affect

There are some aspects of interchange fees that you just can’t change. It’s important to understand what these are, so that you don’t get needlessly frustrated with your poor credit card processor! First, whether the card is a credit or debit card will affect the interchange fee – debit cards have lower interchange rates. Second, the brand or type of card also plays a role. Reward cards that are highly advantageous to the customer usually cost the merchant – higher interchange fees. Finally, the type of customer you’re servicing plays a role as well. Interchange fees are different for individuals, businesses, and government organizations.

The Bottom Line

Interchange fees are a necessary evil when it comes to credit card processing. While there are several things you can do to ensure you’re paying the correct rates, you can’t erase interchange fees entirely. You CAN, however, affect the rates you pay above and beyond interchange fees. Your credit card processor makes a profit on top of the interchange fees – and some make more than others. If you’re tired of being fleeced by your credit card processor, call 360 Payments at 1-855-360-0360 or drop us a line on our website. We’d love to show you why we’re a different kind of credit card processor.