Interchange Definition

Merchant Account Interchange Explained:

What is Interchange? An Interchange fee is a charge assessed on a card payment that serves as a card-issuing bank’s compensation for processing the transaction. Interchange is set by card networks like Visa, Discover, and MasterCard. These networks have different rates and collect different fees for different card types. For example, the fee charged for a debit card is different from a fee for a credit card, and a credit card that has a rewards program attached to it has a different fee than a credit card without rewards. All in all, there are well over 100 different rates that range from 0%-3% and are collectively known as “Interchange” fees. Merchant account providers usually mark their processing rates up above Interchange, either within a tiered pricing structure or through Interchange-plus pricing.

The average rate of Interchange is 1.79%. For each credit card sale, the Interchange fee is charged to the merchant then distributed to the bank that issued the customer’s card as well as a few other processing and routing networks. The only money Visa and MasterCard keep is the “Dues & Assessment” fee, which is usually fixed at 0.11% for all transactions.

Merchants should note that Interchange is not negotiable; the only portion of a processing fee that is negotiable is a provider’s markup above Interchange. A common promotional tactic among merchant services providers is to claim to offer a merchant “wholesale” or “interchange” rates, which is only partially true. These providers do offer Interchange rates, but almost always with an added markup on top of Interchange. If a processor allowed its merchants to process all transactions exactly at the Interchange rate, it would not ever make any money on the transaction.

Interchange Rate Video Explanation

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Why I'm Qualified to Write About Credit Card Processing and Merchant Account Services

I'm a former credit card processing sales director who left the industry because I didn't like how it takes advantage of small business owners. It feeds like a leech on businesses and thrives by imposing fees that are nearly impossible to comprehend. Seeing a need for change, I left and built this website help business owners better understand the industry, research merchant services providers, and get refunds of excessive merchant account fees. My experience of working "behind the curtain" in the industry, and using that knowledge for good, has resulted in millions of dollars returned to hard-working small business owners as well as enterprise-level companies.

From the time that I starting working in the merchant services industry to when I left to create this website, I've been on the pulse of payments for nearly 15 years. It didn't seem fair to keep this "insider" knowledge to myself. To lift the fog, I've reviewed hundreds of companies, read thousands of user reviews, and learned the pricing tricks of every provider. If you have questions about credit card processing, you can find the answers on this website.

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