Interchange Reimbursement: What You Need to Know About Your Most Costly Merchant Account Fee

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If you didn't already know this, I'll fill you in on a little secret. About 80% of your merchant account costs are coming from just one source, and that source is interchange.

I won't get into too much detail about how interchange works, but if you're feeling ambitious, there are plenty of online sources where you can learn more.

In this article, I'll be giving you the CliffsNotes version.

Interchange Reimbursement Fee
Interchange reimbursement is a set fee that the acquiring bank is charged by the issuing bank every time a credit card transaction, or "interchange" occurs between them. The fee is created and regulated by the credit card companies, Visa and MasterCard.

Both Visa and MasterCard have the ability to change those interchange rates twice a year in April and October.

Visa Interchange Rates (PDF)
MasterCard Interchange Rates (PDF)

Take a look at the above PDF docs and you'll notice that there're tens, if not hundreds, of different rate categories (tiers) for various types of credit card transactions (i.e. CPS/Automated Fuel Dispenser, Debit, CPS/Supermarket Debit—All Other, blah, blah, blah).

No need to waste your time trying to memorize all of them now, but in the future I'll show you how to use them as a reference to lower your merchant account costs.

What you do need to know about interchange is the fact that every single transaction that occurs, whether on your website or in your store, falls into one of those rate tiers.

You will never know ahead of time which category your transactions will be charged under. That is up to the credit card company to decide.

Can you see the problem here? How are you supposed to compare merchant accounts based on rate if those rates are so dynamic? It becomes impossible.

In an effort to simplify this whole mess, the ISO/MSP's of the world have created their own pricing structures:

Tiered-Pricing and Interchange-Plus.

If you're looking to lower your current merchant account fees, I might be able to help. Click here to learn more.