The Foundation of Bankcard Fees
Credit card processing fees can eat up a significant portion of your profits if you let them. And although it may feel like it when you get your monthly statement, most of these companies aren’t actually predatory in nature. It’s up to you to learn what you can about the process in order to better position your business and to be able to use the system to your advantage. You can’t give up on card processing—you wouldn’t last very long in this plastic-based economy but you can avoid common mistakes.
Interchange fees, which were created by card networks like Visa and MasterCard, are the fees paid by Merchants to processors for processing card transactions. They form the largest part of any rate model offered to a business…nearly 90% in many instances. Specifically, interchange is provided by acquiring banks to card-issuing banks, but the costs are passed on to the Merchant.
Because interchange fees are set by the card networks, the basics of interchange fees cannot be changed directly by Merchants, Billers, and other organizations. However, new payment technology enables Merchants to encourage their customers to use debit and credit cards that cost less to process, resulting in lower interchange costs over time.
To understand the basics of card interchange fees, one must appreciate the number of variables that enter the equation of each credit or debit card transaction. There are thousands of interchange rates. They depend on a variety of factors, including but not limited to the following:
- Card Program Type (Basic or Rewards, Credit or Debit)
- Card Network (Visa, MasterCard, American Express, or Discover)
- Card Capture Method (Keyed, Swiped or Chip)
- Security and Authentication (PIN, Zip Code, and Inputted Card Information)
- Merchant Category Code
- Size of Transaction
- Size of Card-Issuing Bank (for debit)
Typically, the details of the most current interchange rates of Visa, MasterCard, American Express, and Discover are published annually on their respective websites. Most credit card processing companies and their partners like SDPS earn their income off a less than 1% margin over and above the base interchange costs. Additionally, there are small charges to support updated security programs throughout the industry.
Accepting chip cards, swiping cards and accepting PINs during in-person transactions can drop transactions to a lower interchange rate. In online transactions, Merchants can request additional authentication information of the customer, such as an address or a zip code, or the CID/CVV (Customer Identification Number/Card Verification Value) on the back of the customer’s card.
At SDPS we work with you to understand your business, the type of processing you do now and that which you may do in the future, and help you to determine the best program for your company. To get started now, go here…..