Visa Interchange Rates are Changing: Here’s What You Need to Know

In case you missed it, Visa is planning to make major changes to its interchange rates in 2020. As reported by Bloomberg, Visa interchange fees will go up or down, depending on your industry and the method of payment. This is the biggest change to Visa’s rates in about a decade, so you can bet that banks and merchants are paying attention. 

“The U.S. credit interchange structure has been largely unchanged for the past 10 years,” cites Bloomberg. “Based on the most recent review in the U.S., Visa is adjusting its default U.S. interchange rate structure to optimize acceptance and usage and reflect the current value of Visa products.”

These changes will take into effect in April and October 2020. 

What’s changing?

Swipe fees, that’s what. According to Bloomberg, with Visa’s new interchange rates, the fees for card-not-present transactions will increase. 

If a customer uses a traditional Visa card on a $100 transaction, the fee will go up to $1.99 from $1.90. If a shopper uses a premium Visa card, the fee will increase to $2.60 from $2.50.

While some categories — including education, real estate, and services — may see lower rates under the new changes, the majority of retailers will see their payment processing costs go up. 

As Austin Jensen, senior vice president for government affairs of the Retail Industry Leaders Association, said: 

“Let’s be blunt. VISA teasing that rates will go down for ‘some’ is masking the true impetus for this plan—their aim is to hike rates on the vast majority of merchants.”

Jensen continued, “More people are using plastic, and more merchants accept cards than at any point in our history.  In a free market with competition, that would drive costs down, not up. There is only one reason VISA is preparing to hike fees on merchants—they can.”

What does Visa’s new interchange rates mean for merchants in 2020 and beyond?

Keep a close eye on your merchant statement in May and June to see how Visa’s new rates have affected your business. Chances are, you will see your payment processing costs go up. Credit card processors are expected to increase their fees by 5 to 10 basis points, depending on their payment models. 

If you’re on an interchange-plus pricing structure, you may see some costs increase because acquiring banks are passing on higher fees to merchants. 

Similarly, if you’re on a tiered pricing structure, you will likely see more downgrades — which will lead to more expensive fees. You may also see an adjustment with how transactions are categorized, meaning you will see more non-qualified transactions in your statement. 

Pro tip: If your payment processor uses a tiered pricing structure, you are overpaying for credit card processing. Consider making the switch to interchange-plus, blended pricing, or membership-based pricing instead. 

What should you do?

Here are the steps you should take to minimize your credit card processing costs when Visa’s rate update takes into effect. 

1. Check your credit card processing statement

We’ve said this earlier, but it’s worth repeating. In the coming months, you need to read your credit card processing statement carefully to see if and how Visa’s update has affected you. If your costs have gone up significantly, it may be time to switch to a credit card processor that offers lower rates. 

Payment Depot is an excellent option because unlike traditional processors, we don’t take a cut out of your sales. And while most processors will increase their fees by 4 to 5 basis points, Payment Depot’s membership fees will stay the same. Instead of marking up the interchange fees of card networks like Visa, we’re able to offer you wholesale payment processing rates, which lead to lower credit card processing rates for merchants. 

2. Use AVS

Address Verification Service (AVS) is is a security feature that compares the address provided by the customer to the billing address on file with the issuing bank. It helps minimize fraud by confirming the shoppers’ identity.

AVS is particularly important for card-not-present (CNP) transactions, and you, the merchant, should enter as many customer details as possible to aid the verification service. At the very least, you should be entering the customer’s zip code. The more information you can provide, the lower your processing fees will be. 

3. If you’re a B2B merchant, get qualified for level 2 or 3 processing

If you handle B2B transactions, make sure your transactions qualify for higher data levels (i.e., level 2 and level 3). 

Level 2 and level 3 data levels require you to provide more information, and they come with lower rates. 

This is where gateways like Paytrace come in handy. Paytrace automatically enters extra information to qualify for lower rates.  

Stop overpaying for credit card processing

While Visa’s new interchange rates may result in higher fees, you shouldn’t have to pay more than you have to.

To ensure that you’re only paying minimal fees, choose a merchant services provider that offers the best payment structure for your business. 

Need help doing that? Get in touch with Payment Depot. We’ll offer an unbiased analysis of your current merchant statement or proposal and recommend changes to help you save.