Everything You Need to Know about Mastercard Interchange Rates

Everything You Need to Know about Mastercard Interchange Rates

Mastercard is one of the most trusted credit cards in the world. So, you may notice that Mastercard interchange fees show up quite a bit on your business’ credit card processing statement. 

Mastercard’s interchange rates also change twice a year. So, it’s important to be aware of how the company quantifies interchange rates to stay ahead of your monthly statement. It also makes sense to do your research before deciding to accept Mastercard at your small business.

Infographics Mastercard Interchange Rates 1

In this article, we’ll take a look at Mastercard’s interchange rates for credit card transactions. We’ll also explore the factors that influence Mastercard’s rates and how they stack up against the competition.

What are interchange rates and fees?

Credit card processing costs make up a large portion of any retailer’s monthly expenses. Of these, the interchange is the most expensive fee you’ll encounter when processing credit card transactions. 

Interchange fees are the fees you pay to the card issuers on credit card or debit card transactions. Although transaction fees are determined by the card network –– in this case, Mastercard –– they go to the issuing bank. So, it’s the bank where the customer/cardholder got their card that ultimately receives your payment.

Your bank –– i.e. the acquirer, or merchant bank –– sends a message to the card network. Once the acquirer confirms that your customer has the funds or credit available for the transaction, the transaction is processed. 

You’ll get charged interchange fees every time a customer makes a card purchase. However, there are a few different factors that influence how much you’ll pay.

What factors influence interchange fees?

Interchange is one of three processing fees your small business will encounter when processing customers’ credit transactions. The other two are markup fees/markups and assessment fees/assessments. 

Each card network sets its own interchange rate. Your customer, the cardholder, will ultimately determine the interchange rate you pay based on the card company they choose. Interchange fees are usually expressed as a percentage of your transaction, plus a dollar amount expressed in cents.

The amount you pay for payment processing through Mastercard will depend on a few additional factors. These include the type of business you run (MCC), whether it’s a card-present/card-not-present transaction, and the size of your business. It will also depend on whether it’s made via debit or credit card, e-commerce, or a physical store.

The Mastercard credit card network

As you know, the card brand your customer uses determines your interchange rates. But is the Mastercard card a worthwhile choice to accept at your small business? 

Mastercard’s interchange rates are highly competitive with Discover, American Express, Visa, etc. Since the rates change semiannually, we can’t provide a total for Mastercard’s keyed/swiped credit and debit card transactions.

Mastercard has partnerships that can be beneficial for customers. The company offers perks like free airline miles (the World Elite Mastercard travel credit card) or cashback on purchases. The company also recently rolled out a B2B platform called “Mastercard Track Business Payment Service.” 

Mastercard also offers discount rates for SMBs through its small business cards. We can’t quantify the exact amount you’ll pay for Mastercard interchange rates. But we can assert that Mastercard’s fees are highly competitive with most major types of cards you’ll encounter.

Current Mastercard interchange rates

All transactions aren’t priced equally. Mastercard offers three different types of B2B interchange rates. These are:

  • small business credits
  • unregulated commercial debit/prepaid and large market credits
  • commercial payments account and variable interchange programs

For the purpose of this article, we’ll use averages to quantify interchange rates. You can’t really evaluate Mastercard’s different rates without seeing how they stack up against the competition. Here are the average credit card processing fees for Mastercard, as well as three of the major credit card networks:

  • American Express: 1.58 – 3.30%
  • Discover: 1.53% – 2.53%
  • Mastercard: 1.29% – 2.64%
  • Visa: 1.29% – 2.54%
Infographics Mastercard Interchange Rates 2

What you pay to process each transaction depends on the card the customer uses and the nature of your business. It also depends on the nature of the transaction: swiped, keyed consumer, keyed corporate, etc.

How are Visa and Discover different?

So, what’s the difference between processing a customer’s Mastercard credit card payment, vs one made with Visa, Discover, or Amex? 

Amex and Discover are also card issuers. In other words, they provide credit cards to customers from their financial institutions. Mastercard and Visa, on the other hand, are issued from external banks/ financial institutions –– Wells Fargo, Chase, etc. 

Mastercard websites don’t readily provide a list of participating financial institutions, but you can fill out a request form to receive the info.

You’ll also want to take a look at the additional fees that can fall upon retailers. Visa, for instance, charges a “misuse of authorization fee” for transactions that aren’t paid or reversed correctly. 

If you have stores in a low-income area or have issues processing transactions, this type of fee can add up quickly. Ask your payment processor about additional fees from the get-go, so you aren’t surprised at your monthly bill.

Are interchange fees avoidable?

There is no real way to eliminate your interchange fee. Unless you surcharge your customers –– i.e. pass the cost of swiping a card at your POS station along to them. 

A lot of retailers do this on credit card transactions that don’t meet a certain dollar minimum. This is an especially common practice among small businesses, which often charge a few dollars to process transactions under $10.

No matter how good they are, your service provider can’t eliminate your interchange fee for you. That’s because the fee is set by the MC debit and credit card networks.

How to save on interchange fees

Costco Of Credit Card Processing

If you’re wondering how to save on interchange fees, the question isn’t what credit card to accept, but how to facilitate all of your customers’ preferred payment methods. 

Cash payments are sputtering out during the second wave of COVID-19. Mastercard, Visa, debit cards, Amex, Discover, and touchless payment options like Apple Pay are becoming the new gold standard.

While you can’t negotiate lower rates on interchange, you do have power over what you pay your payment processor. Look at the costs surrounding your interchange payments on your credit card statement. Payment Depot’s interchange-plus pricing model may be able to help you save on merchant services. 

Payment Depot accepts Mastercard as well as all other major credit cards and can help you save 40% a month on credit card processing. Click here to learn more about how we can help your business thrive with our membership model for payment processing.

FAQs about Mastercard Interchange Rates

Q: What are Mastercard interchange rates?

Mastercard interchange rates are fees paid by retailers to the card issuing banks for every credit or debit card transaction. These rates are set by Mastercard but go to the issuing bank. They are usually expressed as a percentage of the transaction, plus a fixed dollar amount. These rates vary depending on factors like the type of business, the nature of the transaction, and the size of the business.

Q: How often do Mastercard’s interchange rates change?

Mastercard’s interchange rates change twice a year. It’s essential for retailers to stay updated with these changes to predict their monthly expenses accurately.

Q: What factors influence the interchange fee I pay as a retailer?

The interchange fee you pay is influenced by the card network your customer uses, the type of business you run, the nature of the transaction (whether it’s a card-present or card-not-present transaction), and the size of your business.

Q: How do Mastercard’s interchange rates compare to other card networks?

Mastercard’s interchange rates are highly competitive, with those offered by American Express, Discover, Visa, and other major card issuers. However, specific rates are subject to change and may vary based on several factors.

Q: Does Mastercard offer any benefits to retailers or small businesses?

Yes, Mastercard offers discount rates for small businesses through its small business cards. It also has partnerships and programs that can provide perks like free airline miles or cashback on purchases.

Q: What can a retailer do to minimize interchange fees?

While it’s not possible to eliminate interchange fees completely, businesses can consider strategies like surcharging customers for credit card transactions that don’t meet a certain dollar minimum. Furthermore, businesses can negotiate the fees they pay to their payment processors to potentially save on overall costs.

Q: Can small businesses save on credit card processing with Payment Depot?

Yes, Payment Depot uses an interchange-plus pricing model that may help businesses save significantly on merchant services. This processor accepts Mastercard, along with all other major credit cards.

Q: What are the average interchange rates for Mastercard?

The average interchange rates for Mastercard are generally between 1.29% and 2.64%. These rates, however, can vary depending on the nature of the transaction and other factors.

Q: Can interchange fees vary based on location?

Yes, interchange fees can vary based on location. For example, it has been reported that interchange fees average around 0.3-0.4% of the transaction amount in Europe, and 2% in the US.

Q: What is the fee for misused authorizations?

Misuse of authorization fee is charged by some card networks like Visa for transactions that are not paid or reversed correctly. This fee can add up quickly, especially for stores in low-income areas or businesses that encounter issues in processing transactions.

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