What Does Interchange Mean In Credit Card Processing

Florence Carpenter

For businesses, the cost of credit card processing can be expensive once you take into account the multiple fees charged by the parties involved. One of the major fees that businesses need to pay is the interchange fee, which is charged per transaction. These fees cover the risk of fraud and the cost of handling transactions shouldered by the card-issuing bank. 

The Average Cost of Interchange Fees

Although some credit card fees are negotiable, interchange fees are fixed. This flat-rate figure is expressed as a percentage of the total amount charged, including the taxable amount. Many variables contribute to the rate of interchange fees, but the average interchange fee comes out to around 2% of every purchase in the United States. 

Interchange fees can vary depending on the country of your acquiring bank, so this is something to keep in mind as you calculate processing costs. In addition, rewards cards and corporate cards tend to have higher interchange rates compared to regular credit cards.

Factors that Impact the Cost of Interchange Fees 

As one of the three major types of credit card processing fees, there are many factors that can impact your interchange rate:

  • Type of transaction: Point of sale transactions are less risky than MOTO and online orders since the card is present at the time of purchase
  • Size of business: Larger businesses tend to have lower rates since they can negotiate more effectively with banks and merchants
  • Type of industry: Some businesses that deal with high-value and higher-risk transactions may be charged a higher interchange rate 
  • Type of card: Debit cards that have PIN codes have lower interchange rates compared to credit cards since they tend to be more secure

Although interchange rates are fixed, credit card associations tend to update their rates and fees in April and October of each year. However, it’s important to stay up to date with any changes that can occur throughout the year. 

Learn more about which online payment processors charge the lowest interchange rates for your business at Processing Card today. 

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