When it comes to accepting credit and debit card transactions for your business, whether online or through a payment terminal, a merchant services provider will offer you a multitude of solutions. Each merchant services provider is different, whether the differentiator is the size of the processor, an ISO or a large processing company, whether it is the service level that you are receiving, or it may be as simple as location to your business.
Whatever the case may be, each merchant services provider, regardless of how big, or what they specialize in, charges you interchange fees and assessment fees in order to provide accepting credit card and debit cards service to your customers. But what are interchange and assessment fees and why do some credit cards cost you most out of each transaction than others?
To better understand what you are paying for, you need to know how a merchant services pricing is established. Simply put, there are two basic fees that collectively, make up the vast majority of the cost of having a merchant account. In the credit card industry, these costs are referred to as interchange and assessments. Both fees are charged by the bank card networks, Visa and MasterCard every time a merchant accepts one of their cards for a purchase.
The interchange rate is a percentage that is set by the card issuer, Visa and MasterCard, which is deducted from each credit card transaction amount through the merchant services provider based on the specific card used - Infinite, high spend, classic etc. The assessment fee is a set percentage of the processing volume charged by Visa and MasterCard, and associated cards that are accepted by the merchant services provider.
There are many components that influence the cost of processing a credit card, but the assessment fee charged for a transaction is determined exclusively by the brand of the card accepted and is set by the issuer.
Interchange can be a bit more complex, because each credit card, depending on the type - as listed above, Infinite, high spend, bears a different percentage associated with accepting that card. There are over dozens of interchange rate breakdowns for specific cards, card present, card not present and so fourth.
Most merchant services providers bundle the interchange rate into specific categories: Qualified cards, non-qualified cards, and mid-qualified. However, this is just one way that a merchant services provider can bundle their pricing. Some merchant services providers choose to flat rate their interchange fees, meaning that all card types, regardless of value, will be paying the same percentage off of each transaction.
IN the end, the bulk of all merchant credit card fees - interchange and assessment are derived from the card issuers, and the pricing structure is a combination or bundled fees, card types and different flat rates that are put together by the merchant services provider.