Interchange 101: What It Is and How It's Determined

May 13, 2019

If you’re a business owner that wants to accept card based payments, interchange is an unavoidable fee. However, what interchange is, who it’s dictated by, and how business owners are impacted by it, can all be unclear if you’re not fully well read on the world of payment processing. Consider the following information about interchange, and how it impacts your business and your cardholders on a daily basis.

What is interchange?

Interchange, sometimes referred to as the interchange rate, is the amount that card processors are required to pay credit card issuers/ financial institution for each credit card transaction. An interchange rate is set by the credit card brand, say Visa or Mastercard, outside of the control of card processors. These rates are set as a percentage of every transaction, and can differ based on how a credit card is used for the transaction; this is to say that a corporate credit card that makes a chip & PIN transaction may have a different interchange rate than a recurring payment made by a consumer credit card.

How are your interchange fees calculated?

As mentioned, the interchange rate is set by a card brand, so interchange fees are calculated against that rate. Interchange rates can differ depending on the type of card and the way in which the transaction was settled, so there many differing rates that a transaction could be charged against. The interchange rate your business pays on a regular basis is dependent on how your payment processor sends your fees to you, but it’s likely an accumulation of the different interchange rates you were charged throughout a billing cycle.

How do payment processors interact with interchange?

Payment processors are responsible for passing through the interchange rate set by the card brand through to their merchants; this is typically done throughout the billing period, so that a merchant sees a final interchange rate on their regular bill. At Moneris, interchange rates are incorporated into our Simplified Pricing plan. Simplified Pricing shows merchants a total processing cost each billing cycle,  incorporates interchange rates within it, as well as two other transaction-based fees. 

For more information on interchange rates, make sure to check out our Interchange Rate Code of Conduct page or our Interchange FAQ page.

The information in this article is provided solely for informational purposes and is not intended to be legal, business or other professional advice or an endorsement of any of the websites or services listed. 

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