What is Interchange

Interchange is a fundamental part of the credit card processing industry and is the basis on which Visa and MasterCard transactions are run. Interchange represents the fee that is paid on behalf of you, the merchant, to the Bank that issued the customer the card currently being used. American Express and Discover cards do not use this system and are based on a different pricing model. This is one of the reasons Am Ex and Discover are often not included in your basic merchant account set up.

Interchange rates are different for each type of card and each type of transaction that a card can be accepted by. The main split is “card present” versus “card not-present” transactions. The interchange rates for “card present” transactions are always less than “card not-present” transactions. This is another reason that whenever you have the opportunity to use a card reader you should do so, as this is the easiest way to prove that the transaction is face to face and guarantee you the lowest rate possible. Items such as what type of business you are, how quickly your transactions are settled with the acquirer and what other information you are able to provide with the transaction will all impact the interchange rate assessed to the transaction.

Both Visa and MasterCard set these rates independently. And while the rates are typically very close some differences may exist between the two companies.

Another important factor to remember is that Visa and MasterCard change these rates. Typically they make changes every April and often again in October, however they reserve the right to alter their rates at anytime. This impacts you the merchant, as these changes dictate that your credit card processing company will include language in your contract that will allow them to update their rates as well. As a result despite the initial rates your contract was based on, the credit card processing company you’re working with has the right to update those rates at their discretion – while you hope it will mirror the slight modifications made by Visa and Mastercard, they can make major modifications if they choose to. This is another reason it is so important to work with a processor you trust and not just the one who showed you a low rate, on your initial call.

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