Merchant services

Payment Processing: Interchange Fee

payment processing visa mastercardOver the last few years, the payment processing industry has been revamped, so as a merchant, you should definitely be monitoring your monthly statements. Take the time to review your rates, make sure that based on your credit card transaction volume, your fees are somewhat similar each month. It is not uncommon for certain payment processing companies to increase rates slowly over time.

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Interchange is the system that Visa and MasterCard put forth in order for them to determine how much to charge acquirers to accept credit card payments. Payment processing companies are charged a minimum percentage in order to provide that service to their merchants. That percentage is then marked up, and passed on to you. The interchange rate directly affects the amount the credit card processors are charged, and in turn, directly affects how you accept credit cards.

Code of Conduct

Prior to the adjustment within the Code of Conduct, payment processors were able to slowly increase fees without having to notify the merchant. Currently, the system in place protects the merchant whereby, the payment processor must give 90 days notice to the merchant about any rate increase, and within that notification period, you are able to cancel any existing merchant agreement without applicable cancellation fees. However, this cancellation of the merchant agreement does not pertain to the rental or lease agreement that may be in place for the use or eventual purchase of the debit and credit card terminal.

Issuers and Acquirers 

Issuers and acquirers are the two divisions we’re dealing with when discussing the credit card world. Issuers are financial institutions, the banks that issue Visa’s and MasterCard’s to clients. So, the clients are the banks’ customers. Acquirers, payment-processing companies provide merchants with the ability to accept credit card payments. Therefore, the merchants are the acquirers’ customers.

Visa and MasterCard compete for the issue of specific point level, and high spend credit cards in order to give incentive to issuing banks to offer those types of credit cards to customers by giving them payment in form of interchange. This interchange is what you as a merchant see on your monthly statement. The different types of credit cards that are issued, and then used to purchase a product or service, has an interchange rate that is attached to it. A rate that varies from card to card.

Premium Cards

Merchants continue to fund this ongoing competition between Visa and MasterCard. Both companies launched premium cards into the Canadian market and these cards carried a higher interchange rate. Premium cardholders are promised travel points and other exciting benefits, but the merchants are the ones who are left to foot the bill. Merchants need to pay twice as much to accept premium cards.

In short, merchants are being charged an increase interchange rate that is based on what interchange percentage the issuing banks has decided to charge the acquirers, payment processing companies. This is important, because when payment processing companies are expressing that they provide the lowest rates, or that they have no monthly fees or certain cards are not being charged interchange, they are making that lost profit up elsewhere. And it will most likely be in their service to you.

Service and Support

All payment processors are provided the same interchange rate for all issued cards. There is not a different interchange table for larger companies or smaller companies, which means as a merchant, you have an obligation to your business to work with a payment processing company that can provide you with the best service, support and technology. Interchange rates will only increase, and when they do, the companies that have been all about rates and fees will eventually be unable to service you, and that will negatively affect your business.

Now that you have an understanding of how the system works, you will be able to make educated decisions when it comes to choosing a payment-processing provider. We will continue to stress the importance of doing your due diligence when accepting credit and debit cards for your business.  


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Emily Moore

With seven years of experience in the industry, Emily is the Merchant Boarding and Underwriting Specialist for BNA Smart Payment Systems. She also has experience in credit risk management, fraud and chargeback analysis, and in-depth knowledge of chargeback mitigation. At BNA, she is responsible for reviewing, investigating, and resolving irregular transactions; identifying and analyzing trends; exchanging knowledge of trends with peers and supervisors; and keeping records of past fraudulent activities. With a solid understanding of current fraud trends and software applications, Emily has a methodical approach to problem solving, great attention to detail, and the ability to recognize patterns. As a fitness enthusiast, Emily enjoys CrossFit and playing sports to keep active. She also loves the outdoors and spending time up north.

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