Interchange refers to the fees that merchants pay to the issuing bank each time a credit or debit card transaction is processed. Set by card networks like Visa and Mastercard, these fees are intended to compensate issuing banks for the risk and administrative costs associated with card transactions. Interchange fees vary based on factors such as transaction type, merchant industry, and card type, and are typically calculated as a percentage of the transaction amount plus a fixed fee. Interchange is a core component of the overall transaction cost and significantly influences the processing rates merchants pay.
Interchange fees can range from 1% to 3% or more of each transaction, often making up the largest portion of a merchant’s payment processing costs. Example: A restaurant chain processing high volumes of credit card payments incurred over $50,000 in annual interchange fees, prompting it to negotiate with processors for rate optimization. Insight: Studies show that interchange fees make up around 70% to 80% of total processing costs for merchants, with high-risk industries, such as travel and luxury retail, generally facing higher rates. Understanding interchange can help businesses strategically manage processing costs.
Swipesum provides expert interchange management services, analyzing your transaction data to help you secure the best possible rates. We work to ensure that you are categorized correctly, identify areas for rate reductions, and negotiate with processors to minimize interchange costs. With Swipesum’s support, you’ll reduce your processing expenses and improve profit margins, all while maintaining compliance with card network regulations.
