Understanding Visa Interchange Rates: A Small Business Owner’s Guide
An interchange rate is a fee that your customer’s credit card company –– in this case, Visa –– takes from each transaction. Whether you’re an e-commerce or physical retailer, understanding interchange fees can often be challenging as a small business owner.
It’s even more challenging when you realize that Visa cards charge slightly different interchange rates than other card brands. No two card networks process interchange fees the same way.
Interchange fees (or interchange reimbursement fees) are fees paid by your financial institution to your customer’s card issuer. You’ll need to understand Visa interchange rates, so you don’t have any surprises on your monthly statement.
Here’s everything you need to know about Visa’s interchange rates and fees, with answers to FAQs about the Visa network.
What are interchange rates and fees?
Interchange is applied when providers have a wholesale, i.e. interchange-plus pricing model. It’s the wholesale cost that you’ll end up paying for each transaction. But it doesn’t go to your payment processing company.
Interchange fees are withheld from your (the acquirer’s) bank. Instead, the money that’s withheld goes straight to the cardholder’s (your customer’s) credit card network.
Although transaction fees are determined by the card network –– in this case, Visa –– they ultimately go to the issuing bank. So, it’s the bank where the customer/cardholder got their card that ultimately receives your payment.
Interchange varies depending on whether it’s a debit card or credit card transaction, and whether it’s swiped or keyed in. The merchant category code (MCC) that your business falls under will also impact your total.
Who sets interchange fees and where do they go?
Interchange is one of three credit card processing fees you will come across, along with markup fees (or markups) and assessment fees (or assessments).
Interchange fees are preset by your consumer’s credit card network. What you pay will be determined by the type of card that your customer uses for credit card payments, for example, Visa, Mastercard, Amex, Discover, etc.
Your customer’s card issuers set and receive your interchange fee. So, there’s no way to receive a discount rate on interchange without changing the MCC your business falls under.
The Visa credit card network
Let’s take a look at how the Visa credit card network compares with other card networks. Visa’s interchange rates change regularly, so accepting Visa credit and debit card transactions can add up quickly. Visa and other reigning card networks have merchants in a double bind since the Visa card transactions comprise a big chunk of sales.
Visa’s Custom Payment System is also called CPS. It’s the one exemption to the impossibility of lowering interchange fees. CPS makes it possible for merchants to receive lower interchange processing fees on card transactions. It’s not a business card, but a list of criteria that businesses need to follow to receive lower rates.
But don’t count on the merchant discount from Visa. If any transactions don’t meet the highly specific CPS criteria, you’ll still be charged a higher interchange rate.
Current Visa interchange rates
When your customer swipes their Visa card at your POS station, their financial institution will confirm a few different factors. These factors determine what Visa interchange fees you’ll pay for card transactions:
- Is it a card-present or card-not-present transaction?
- Is it a personal, prepaid, or business card?
- Your merchant category code
- Are you using a Visa debit or a Visa credit card?
- The transaction amount of your customer’s purchase
Visa and Mastercard recently opted to forego an intended price hike due to the pandemic. In a recent statement, Visa said that they’d hold off on the complex rate change “until the economy recovers.”
Mastercard vs Visa interchange rates
Let’s take a look at what different card companies charge for credit card transactions. We recently published a graph of the Visa USA/Mastercard transaction fees that you can see here.
Visa Business and Mastercard Corporate both charge less for corporate transactions than for consumer purchases. Visa’s rates for certain transactions, such as debit cards, are lower than Mastercard.
However, most businesses will need to accept both forms of payment to avoid turning away customers. Visa offers a wide array of cards catered to different consumer preferences. The Visa Rewards Signature Card, for instance, lets customers earn rewards on experiences like hotel stays, travel, entertainment, and dining.
American Express often ends up charging more for processing fees than Mastercard or Visa. Amex calls their interchange rate a “discount rate” on statements, but it stands for the same thing. However, travelers can benefit from Amex’s security features, so it remains a popular payment method.
Are Visa’s interchange rates changing any time soon?
Due to retailer requests and petitions, Visa interchange rates will remain fixed until April of next year. However, Visa and Mastercard are planning to undergo rate changes in 2022, barring any more unforeseen global catastrophes. Here are Visa’s present transaction rates, which you can count on until April of 2022.
The bottom line
As you can imagine, a lot goes into quantifying interchange. There are limited ways to save on interchange fees, so many retailers resort to surcharging –– or passing the expense onto customers to make back their money.
Partnering with a merchant services provider that uses interchange-plus pricing can help you save money on credit card processing without alienating customers.
There’s no way to eliminate interchange fees. However, Payment Depot charges no hidden fees and offers membership-based wholesale rates to help merchants save more. By working with Payment Depot, you can save more and pass the benefits along to your customers.