Interchange Fees Explained: How Fees Work in Credit Card Processing


Interchange fees are one of the most complex ideas that merchants must consider when it comes to credit card processing. Being charged different rates for different types of transactions can quickly become confusing, and it can be difficult to understand who exactly is getting paid each time you accept a credit card payment. In this blog post, we’ve put together a basic guide to interchange fees so you can better understand their structure.

Interchange Fees Explained

Put simply, an interchange fee is the fee that a merchant services provider (MSP) must pay to the bank who has issued that card when processing a credit card transaction. Interchange fees must be paid by all MSPs, large or small, on every transaction. These fees are set by the credit card networks such as Visa, MasterCard and American Express.

The actual interchange rate, or what this fee will be, can vary depending on which bank has issued the card, the type of card it is, the region as well as the type of transaction (online, in-store, mobile, etc.) Generally, all interchange rates will be made up of two numbers: a percentage of the total sale, and a per-transaction fee. For example, an interchange fee might read as 2% plus $0.08. These rates can fluctuate over time according to the costs of moving money, current interest rates and the risks involved for the lender.

Interchange fees are intended to cover the costs of “handling” the transaction, as well as the credit risks for the bank who is actually providing the funds. Allowing a payment to go through opens up the bank to potential for fraud, bad debt, so interchange fees are charged to mitigate some of these costs.

Swift Payments’s Cost+ Pricing

a href="">Cost+ pricing (also known as interchange+ pricing) is a highly cost effective and transparent fee structure. Here’s how it works: when you as a merchant process a payment, the interchange fee (the direct cost from Visa or MasterCard) is passed directly to you. We only charge you a small markup on top of your monthly processing volume, rather than complicating things with long-term contracts or complex rate structures.

The simplicity of this system offers true savings and complete transparency for you as a merchant. Plus, we guarantee that our Cost+ margin will never increase over the lifetime of your merchant account! Though the payment processing industry is known for is complex rate structures and additional fees, we strive to make things easy.

Should you need interchange fees explained further, or would like to discover how Swift Payments can offer you a more transparent and affordable payment processing solution, get in touch with us today! We’d love to show you why our Cost+ pricing makes sense for your business.



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