MasterCard Interchange Rates: What You Need to Know

All merchants accepting credit or debit card purchases, whether in-store or online, will be familiar with the concept of interchange rates — these pesky fees that can mount up quickly and cut deeply into merchants earnings. These rates and the requirements around them are often quite complicated, and many merchants can end up paying them without understanding what they are or whether there is a better way to work with the card issuers to secure a better rate. 

While every merchant will need to look at the particularities of their operation to determine which categories apply to them, we have set out to provide you with all you need to know about Mastercard interchange rates; what they are, how much they cost, and what merchants can do to get a better rate.

What Are Interchange Rates?

Before we dive into the specifics of Mastercard interchange rates, let’s first take a quick look at what interchange rates are in order to understand better how merchants qualify for different levels. 

Most merchants will understand that whenever a transaction occurs between the merchant and a consumer, a payment is made between the involved banks to cover the fee for the acceptance of card purchases. This transaction fee is paid by the merchant’s bank (the acquiring bank) to the customer’s bank (the issuing bank), which will have set interchange rates. 

Typically this process is automatic. Every time a credit or debit card transaction is processed, the card-issuing bank (the customer’s bank) deducts the interchange fee from the amount that the merchant puts through the system in order to pay for the transaction. Once the deduction is made, the acquiring bank (the merchant’s bank) pays the merchant the remaining amount – this is less the issuing banks’ fee (the interchange fee) and usually also less a small fee from the acquiring bank. 

Those fees are interchange fees, and the rates of those fees can change depending on the card issuer and the transaction volume of the business. When digging into them, the pricing structures can be pretty convoluted, and pricing can differ depending on regions or jurisdictions, as well as the type of card, size of the merchant, and type of transaction — online, in-store, phone order, and other factors.

To add to the complexity, every issuing bank, or credit card network, sets their own interchange rates, so merchants need to understand the different interchange rates for each card issuer. 

It is worth noting the Mastercard and other card issuers have no role in determining the acquirer (merchant bank) pricing policies or agreements. This article discusses only the Mastercard interchange rates for merchants. 

How Much Are Mastercard Interchange Rates?

In this section, we will provide merchants with the Mastercard interchange fees that took effect as of April 12th, 2019. These interchange rates are valid between 2019 and 2020. Anyone reading this article post-April 2020 is advised to refer to Mastercard’s Merchant Interchange Rates webpage to check if there have been any changes. 

The Mastercard interchange rates listed each have various requirements, known as interchange qualifications, which must be satisfied on each transaction in order for a transaction to qualify for that rate. Mastercard’s systems check that all of these requirements are met when the transaction is submitted against a particular interchange rate. In order to qualify for the best rates, merchants should work to ensure they meet the criteria necessary for the rates that are most beneficial to them. This includes elements such as: 

• Merchant category – each merchant will belong to a particular merchant category, which has specific interchange rates
• Presence or absence of magnetic stripe data – card-not-present transactions (all online transactions) are considered riskier than card-present transactions, so they will tend to warrant higher interchange rates 
• The time between authorization and clearing
• Submission of enhanced transaction data – data with on the security codes or AVS results usually qualify for lower rates
• Merchant’s Mastercard sales and transaction volume – larger merchants tend to get lower rates, as they have more bargaining power to negotiate them
• Card owner – whether the card belongs to an individual, corporation, or small business, can impact which rates will be applied.

Current US Mastercard Interchange Rates for 2019

These rates apply for US-issued cards making purchases at US-based merchants. 

For more rates and more details on the rates listed above, visit Mastercard’s US Interchange Rates 2019-2020. 

How Can Merchants Lower Their Interchange Rate?

While it is not exactly possible to lower the interchange rates that are set by Mastercard, it is possible for merchants to reduce their overall credit card processing rates by searching for the best processor. 

Depending on the merchants processing volume, there can often be room for negotiation with the payment processor to get a better overall price. Working this way, merchants are usually able to secure more transparent pricing — limiting the guesswork of figuring out interchange fees — and other benefits based on being part of that processor.  

With a good processor, merchants will be fully aware of the fees every time a card is accepted, making it easier to plan and forecast earnings. 

How Often Do Interchange Rates Change?

Mastercard merchant fees are typically reviewed and changed semiannually, or at least yearly. It is uncommon that these changes would be drastic, but merchants should be mindful to keep up to date on when the current interchange rates are due to change, learn whatever those changes may be and how they will impact their organization. 

Whether you run a small or large operation, it is essential that you understand the Mastercard and other card network interchange rates in order to determine which category to try and qualify for, and which processor is able to give you the best available overall rates. 

Need help figuring out your rates?

If you’re having trouble identifying the information we’ve outlined above, feel free to send us your merchant statement and our payment consultants will analyze it for you.