Interchange is what happens when a card payment transaction is passed between a merchant and First Data and then between First Data and the payment brands (such as Visa®, MasterCard®, American Express® and Discover®), and finally between the payment brands and the bank that issued the card.
An interchange fee is charged on every transaction a merchant processes, and this fee is usually paid by the payment processor to the issuing bank through the payment brands. This fee covers the costs of the issuing banks for offering what are essentially lines of credit, their rewards programs and the resulting fraud mitigation.
Who Establishes the Fees and Rates
Interchange fees are set by the payment brands. The rate that you pay for a transaction will vary depending on several factors:
• Type of card (debit, credit, rewards card)
• Type of transaction (the card is present, a phone order, an online order) and the amount of that transaction
• Your business type and your annual transaction volume
The Interchange fee is also tied to the level of risk for that transaction; the lower the risk, the lower the rate will be. So, for example, a transaction conducted in a card-present environment, such as in a store, is a lower risk and fee than in a card-not-present environment, such as on a web site.
For a full listing of interchange fee programs, and the most current rates, please refer to the respective payment brand websites (links provided below).
In addition to interchange fees, the payment brand charge an assessment fee, which covers the costs of managing their network.
Payment Brands Offer More Information
Understanding interchange rates can be complicated because the payment brands do not have one set rate that applies to every industry or, indeed, every type of transaction. Additionally, the rates are adjusted from time to time. To learn more about current interchange rates, visit the payment brands’ Web sites:
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