What is Interchange?

Originally developed as an income incentive for banks to issue MasterCard® and Visa® cards, Interchange is a fee the merchant’s Acquiring bank (as represented by the payment processor or merchant service provider’s sponsoring bank) must pay or reimburse back to the Card Issuing bank (customer’s card bank) for converting a credit or debit card payment into an electronic or cash deposit into the merchant’s bank.

The cost of Interchange fees are mandated and determined by the major card associations (Visa®, MasterCard®, American Express® and Discover®) and can vary based on various elements of risk in processing certain card payments. Today, there are hundreds of Interchange rates while the pricing of Interchange fees is complex and varies among card brands. Interchange fees can vary among the card brands and are based on merchant type, type of card accepted, method card was processed and other data elements passed during authorization and settlement which minimize the inherent risk of the transaction.

Interchange fees represent the largest component of your merchant processing fees and account for approximately 75-90% of your overall processing fees. It is important to note however, Interchange Fees is a non-negotiable aspect of your merchant account and is that same rate no matter which processor you choose. APS Chicago can work with in other ways to optimize or manage your fees to lessen the impact of your processing costs.