Interchange is the cost associated with credit card processing: the underlying percentage rate and transaction fee. There are over 300 different interchange rates and fees, so the cost can vary depending on many factors.
Typically, a higher risk transaction will cost the merchant a little more. For example, card not present or eCommerce transactions will be more expensive compared to an in-person transaction where the customer inserts a chipped card.
Rewards cards are also more expensive. Any time a bank is giving rewards back to the customers, the interchange reimbursement that the bank gets is going to be a little higher. In turn, the merchant will pay a little more for the transaction.
The Importance of Being Set Up the Correct Way
Interchange management is important for businesses. You need to be sure that you are set up in the correct way. If you own a hotel, then you need the credit card processing system to be set up as a hotel with the right MCC code and the specific prompts on the credit card terminal and point of sale.
In a setup where the card isn’t present, then the transaction processing needs to be set up with address verification and CVV to fight any chargebacks and disputes. This setup also increases the likelihood that the customer really has the card in front of them when they are submitting the information for the transaction.
Do Not Skip Information
If you skip entering certain information, such as not entering the address when the card isn’t present, then the card will default to what is known as an earth category. On average, this transaction is 40 or 50 basis points higher by simply not entering that information at the time of sale.
Considering these details will help to minimize the risk of transactions so that you can manage the fees that you are paying for the credit card transactions.
Do you have questions about setting up or managing your credit card processing system? I am always here to answer your questions! Call any time to learn more about how I can help.