The Role of Interchange
Interchange is the fee that the card issuer or the debit network charges the merchant to process a payment. Interchange is designed to compensate card-issuing institutions, such as banks, for the risk and the expense they incur to process transactions; interchange is included in the transaction fee that your payment processor charges. Credit card interchange and debit card interchange is set by the associations based on card type, industry type, qualification elements, and processing method used.
*Note that in June 2011, it was mandated by the federal government that banks with more than $10B in assets must charge a lower interchange fee than banks with less than $10B in assets for debit card transactions only. Thus, merchants should look for two different debit card interchange schedules depending on the size of the processing bank. With Visa, these rates can be found under “EXEMPT Check Card” (for banks with less than $10B in assets) and “REGULATED Visa Check Card” (for banks with over $10B in assets) in their October 2011 Interchange Reimbursement Fee guide.*
While you cannot control some of the factors that affect your total transaction fee, such as the type of card the consumer swipes, you can help minimize your interchange costs by:
- Swiping customer cards whenever possible (for a card-present transaction and thus a lower rate);
- Avoiding voice authorizations where possible;
- Performing daily settlements;
- Avoiding authorization and settlement amount mismatches;
- Employing methods that encourage your customers to contact you directly rather than disputing a transaction, which can help avoid charge-back fees;
- Capturing additional security information with Internet and/or phone transactions.
Article by Bluefin Payment Systems.