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How to Manage Interchange Fees

Credit Card Interchange Fees Explained

The interchange fee is what your Any merchant that begins accepting credit cards can expect to pay a range of processing-related charges. For most businesses, however, the wholesale or “interchange fee” represents the lion’s share of those expenses.

Yet, what is an interchange fee, and what steps can you take to manage or reduce this charge within your business?

Acquiring bank pays to your customers’ credit card-issuing bank to process payments within your business. Your merchant account provider passes those charges to you. Established by the major card brands, interchange fees typically range from 1-3 percent.

There are a number of factors that contribute to determining the interchange rate on a transaction. 

  • If you process a lot of payments over the phone, you may end up paying a slightly higher interchange fee. With card-not-present transactions, it’s harder to verify the true identity of the buyer. To compensate for this higher risk, the card issuer may charge more for each purchase.
  • If you offer Level 2 or Level 3 credit card processing, you might qualify for lower interchange rates. This is because these more secure payment options help to reduce the risk of fraud.
  • If your customers use reward cards, the rate may go up to help the card issuer cover the cost of extra perks.
  • If you’re a high-volume merchant, you can sometimes negotiate the interchange fee down. In cases where it’s impossible to lower the rate, you may qualify for other types of perks. 

Though, why pay any fees at all?

Won’t you keep a larger portion of each sale if you only accept cash and checks?

Not necessarily. 

The ‘Hidden’ Advantages of Paying Interchange Fees

Although no merchant enjoys paying this fee, credit card processing offers several advantages over traditional forms of payment like cash and checks.

Ironically, the biggest advantage is cost.

Paper money is deceptively expensive. Once lost or stolen, that money is gone forever. Yet, you also incur hidden costs every minute you spend counting, organizing, recording or depositing any of the cash that enters your business.

The same is true with checks. To properly manage this payment option, you have to invest in paper, printers, postage, employee hours and frequent trips to the bank. Altogether, each paper check entering your system results in as much as $20 in hidden costs.

By contrast, credit card processing is faster, more secure and cheaper — even with the factored-in interchange fee.

Moreover, accepting credit cards can actually attract new customers boost revenue:

  • If you operate a brick-and-mortar store, hanging Visa, Mastercard and AMEX decals in your window can attract more foot traffic.
  • If you run an e-commerce store, credit card acceptance lets you connect with customers all over the globe.
  • If you are a service provider, accepting credit cards makes it convenient for your clientele.

Download Whitepaper: Understanding Interchange Pricing For Your Business

Learn More About BluePay’s Credit Card Interchange Rates

If you’re thinking about adding credit card processing to your payment environment, let us know. Our interchange fees are at the lower end of the spectrum, with many retail merchants qualifying for wholesale rates as low as 0.05 percent.

To learn more about BluePay’s payment processing and interchange fees, schedule a free appointment with our team of payment experts today.

Topics: Merchant Accounts

Welcome to the BluePay Blog!

Whether you're a small business, an enterprise corporation, a financial institution, or a software partner, we have created a series of blog posts to help you and your customers, learn more about the complex nature of payments. Take a look to learn how payments can help to simplify your business operation, and may even help to grow your revenue.

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