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.

Interchange Plus Pricing

Interchange Plus is a term related to the billing method Merchant Services Providers use to charge for the cost of processing credit and debit cards. Also known as Cost Plus Pricing or Interchange Pass-Through, this pricing method provides Merchants with the most transparent billing and cost-effective processing; passing the actual cost of card brand Interchange, Dues and Assessments and reporting the breakdown of all fees and Provider surcharges on the monthly merchant statement.

Interchange Optimization

While there are several hundred Interchange charge-types, some can be optimized to insure you receive the best Interchange rates. The ability optimize Interchange can make a significant difference to your bottom-line, saving your company up to 1.15% on the Interchange fees!

Interchange rates as it relates to Visa® and Mastercard® Business, Corporate, Commercial, Fleet and Purchasing cards are based on different tiers or levels, respectively and are dependent upon the information of data submitted and passed back to the card Issuing bank either during authorization or before its settlement.

These tiers or levels are Level 1, Level 2 and Level 3. Simply stated, transactions submitting the most information qualify at the highest level (Level 3) receiving the lowest Interchange rates while, transactions that do not meet their enhanced data level requirements are categorized at a lower tier resulting in higher processing costs.

Since Interchange is paid directly to the card Issuing banks, there is no incentive for a Merchant Service Provider to help you qualify for Level 2 or Level 3 Interchange rates. As your Merchant Account advocate, our team at APS Chicago will provide you the necessary technology and best practices to qualify for Level 2 and Level 3 Interchange while performing on-going management of your daily transaction insuring you qualify at the lowest Interchange rates. 

Interchange Pass-Thru

Interchange Pass-Thru is a term related to the billing method Merchant Services Providers use to charge for the cost of processing credit and debit cards. Also known as Interchange Plus or Cost Plus, this pricing method provides Merchants with the most transparent billing and cost-effective processing; passing the actual cost of card brand Interchange, Dues and Assessments and reporting the breakdown of all fees and Provider surcharges on your monthly merchant statement.

Because Interchange and Assessments are set by the various card associations (and are the same for all Merchant Services Providers), merchants are easily able to compare different providers' charges for Processing Services as it is the only variable cost component. The greatest advantage of Interchange Plus pricing is that it allows you to see the three cost components, giving you the opportunity to determine the type and mix of cards you're accepting, and their corresponding interchange rates and fees. Reporting that shows the interchange paid on every single transaction allow merchants to identify key payment card statistics. This information allows us to work with our merchants on an ongoing basis to refine card acceptance methods and institute best practices. 

In working with our experienced merchant services team, we will be able to identify areas to optimize and lower your Interchange costs. Also, introduce the latest technology making the process of submitting additional card level data efficient and cost-effective avoiding costly downgrades by card associations and their related Interchange fees.

APS-Chicago True Interchange Plus Pricing

Some merchant service providers and payment processors, determine and add additional costs to various card types interchange costs that may dramatically affect your bottom line processing fees. At APS Chicago, we provide pass-through of the true cost of Interchange.