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What is interchange | We explain

Posted by Alex Neir on Tue, May 08, 2012 @ 11:07 AM
What is Interchange

What is interchange when referring to your merchant account pricing? This is a common question that once understood can help you to drastically reduce your credit card processing costs.

What is interchange?

Simple – it’s wholesale. Wholesale is the price the manufacture sells the product to the retailer at. The retailer marks up the price and then sells the product to the consumer. This same thing happens with credit card processing.

The credit card associations (Visa, Master Card, Discover, American Express, etc) and the issuing banks (Chase, Capitol One, etc) set the wholesale price for processing credit cards. This wholesale price is called interchange.

The processor then marks up the wholesale price or interchange price and that is the pricing you see on your merchant account statement each month. Just like every other wholesale to retail industry there are no set standards on the mark up for the credit card processing industry. Therefor if you do not understand the margin that your processor has built into your rates it’s hard to know if you are over paying for the service. Here is a detailed analysis of how the interchange margin is calculated.  

No one can pay less than wholesale or interchange to process credit cards, so the closer you get to interchange the better deal you have received.  

Would you like a wholesale or interchange pricing quote? Simply provide us with some information on your business and a representative will generate a pricing proposal.

Tags: What is interchange, Interchange Pricing, Interchange Credit Card Processing

Interchange credit card processing | A simplified overview

Posted by Alex Neir on Thu, April 19, 2012 @ 02:50 PM
Interchange Credit Card Processing

Understanding how interchange affects your business’s credit card processing rates is the single most important thing you should know. Interchange credit card processing is the least expensive way to process credit cards.

Interchange represents the wholesale price of accepting credit cards. The credit card issuing banks and credit card associations sell interchange rates as wholesale to the processing community. The processing community then marks up interchange in order to make a profit. So, understanding how that markup is determined can improve your ability to negotiate the very best rates available for your business type.

What is Interchange?

Interchange is network of interconnected financial institutions / banks. Every single bank that issues credit cards to consumers is connected to the interchange network. Connection to the interchange network ensures that the account associated with credit card the bank issues can be accessed by Visa, Master Card, Discover etc. Account access is necessary for money verification (approval) and money collection (settlement).   

The credit card issuing banks and the credit card associations control interchange. As a group they determine the fee paid to access the interchange network. The fees are broken down into no less than 185 categories based on the industry of the merchant, how the transaction is being captured and what type of credit card is being used. These fees represent the wholesale rate for accepting credit cards. The amount above interchange that your business pays to process credit cards tells you if your pricing is good, bad or horrible.

Would you like to know if you are overpaying the wholesale interchange rate?

Tags: Interchange Fees, Interchange Pricing, Interchange Credit Card Processing