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The Complete Guide To Credit Card Interchange Rates & Transactional Factors Affecting Them

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Frank Kehl

Frank Kehl

Frank Kehl has been writing about merchant services, payment gateways, and international money transfer services since 2015. He has a Bachelor of Science degree from Penn State and a Juris Doctorate from the Ventura College of Law. After a long and enjoyable career of traveling around the world as an Air Force navigator, he’s comfortably settled down in the wine country town of Paso Robles in California’s scenic Central Coast region. He enjoys reading, photography, hiking, and numerous other outdoor pursuits.

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6 Comments

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    raffaele

    On average, what is the portion of the Interchange fee that is then paid to the Issuer Bank?
    If Visa makes 1.5%, how much is going to the bank that has “issued” the card with VISA?

      Jessica Dinsmore

      Hi Raffaele,

      Visa and other card networks charge a network fee on each transaction, typically around 0.05% (not 1.5%). This is essentially a licensing fee for the use of their logo on the credit card. The issuing bank – which is extending credit to the customer and assuming all of the risks in doing so – gets the interchange fees. This can be confusing because the interchange rates are published by Visa, not the individual banks. As we discuss in the article, roughly 70-90% of the processing costs for any transaction will go to interchange fees, with the bulk of the remaining costs going to your processor as a markup.

        Stephanie M Davis

        Although there are many factors that impact interchange (cp, cnp, amount) can you share the calculation of those two averages debit .3 and credit 1.8 so I can understand if we are calculating ours consistently. Also, can you share or lead me to information that would help identify areas of opportunity to improve credit interchange? I understand that the networks have different fees and processors as well, but on the credit side, what factors have a significant impact to the interchange rate?

        Thank you!

          Jessica Dinsmore

          Hi Stephanie,

          The 0.3% and 1.8% figures are not calculated averages. They’re merely rough estimates based upon all of the possible interchange rates from each of the major credit card brands. To calculate the average for your business, you would have to look at which specific interchange rates apply to your business. For example, interchange rates for auto fuel sales won’t apply unless you’re running a gas station.
          If you’re on an interchange-plus or membership pricing plan, you can look at the data from your monthly processing statements and figure out what you’re actually paying in interchange fees. Unfortunately, you won’t be able to do this with a tiered or flat-rate pricing plan.
          Also, there isn’t much you can do to lower your interchange costs. Submitting your batches promptly at the end of the day will help to avoid paying a higher rate, but that’s about it.

            Eric Olson

            Great post. Interchange-plus is absolutely the way to go. That is why we only allow interchange-plus pricing in the credit card processing comparison shopping engine we built at TransFS.com. Here are two posts we have written about interchange-plus pricing that might be helpful to Merchant Maverick readers:

            What is interchange-plus: http://bit.ly/iXUZE

            Why you should want interchange-plus pricing: http://bit.ly/3emtIZ

            Enjoy!

            Cheers,
            Eric Olson
            Co-founder: TransFS.com

              This comment refers to an earlier version of this post and may be outdated.

              The Merchant Maverick

              Eric thanks for the kind words, and the awesome articles. I can imagine that your services are much needed in this day and age. I still haven’t had a chance to take a look at TransFS in detail…work’s been extremely busy. But, I’ll definitely take some time in the very near future. 🙂

              Have a great weekend!

                This comment refers to an earlier version of this post and may be outdated.

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              Our unbiased reviews and content are supported in part by affiliate partnerships, and we adhere to strict guidelines to preserve editorial integrity. The editorial content on this page is not provided by any of the companies mentioned and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author’s alone.

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