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Sep 22, 2008

Will New Interchange Rates Affect Your Business?

Most merchants have likely seen a disclaimer on their monthly credit card processing statements about an upcoming increase in Interchange rates. The card associations (Visa and MasterCard) have announced some significant changes.  As you are probably aware there are hundreds of different Interchange categories. During April and October, rates in some categories are increased or decreased, and new categories are created. These Interchange rates are not to be confused with reimbursement fees. I mention this because there are two different rate charts. Reimbursement fees are charged to financial institutions to transfer funds between issuing banks. Yes, the banks pay percentages as well.

Several new categories will take effect October 3rd, 2008. Debt Repayment, Government to Government, and Tax Payment are some of Visa’s new categories.

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Sep 16, 2008

How Are Your Card Processing Fees Assessed?

“Interchange fee” is a term used in the payment card industry to describe a fee that a merchant’s bank (the “acquiring bank”) pays a customer’s bank (the “issuing bank”) when merchants accept cards using card networks, such as Visa and MasterCard, for purchases. Although Visa and MasterCard determine Interchange rates, the fees are not retained by them. They only act as intermediaries between the members on either end of the transaction.

In nature we have the cycle of life – in card processing we have the life of a transaction. It is important to understand where the fees come from and know who all the players are.

  • The process starts with the consumer making a purchase via a terminal or website.
  • The merchant’s terminal transmits the transaction, via DSL or phone line, to the acquiring bank.
  • The acquiring bank routes the transaction to a processor, and then to the card associations via Visa’s system (VisaNet) or MasterCard’s system (INET).
  • The association’s system requests an approval from the issuing bank.
  • The issuing bank sends back a response. If the card is approved, an authorization code is sent back to the association. The association sends the code to the acquiring bank, and then to the merchants terminal.

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Sep 8, 2008

How Rising Interchange Rates Can Affect Your Business

There are many third party processors out there that benefit when the Bank Card Associations (Visa and MasterCard) raise their rates. They look at this as an opportunity to make an additional profit from their merchants. Merchant services providers get to decide how they will pass the various increases and decreases through to the merchant. More often it is the increases that get passed on, and not the decreases. New Visa Interchange rates, MasterCard Interchange rates, and other processor Interchange rate schedules are typically published by the Bank Card Associations in April and October.

Since there are many different processing categories for Interchange rates, they can be confusing to most merchants. Merchants pay higher or lower rates depending on, but not limited to, whether or not it was a rewards card, purchase card, or debit card. Rates can also be assessed based on your SIC code and how often you batch your terminal.

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