What is Interchange?
"Interchange" are the fees charged by the issuing bank for any credit card transaction. They're paid by all merchants - interchange is known as the "base rate" for any transaction. Interchange varies from card to card.
It may be helpful to quickly refresh on who the main players are - the issuing bank, the acquiring bank, and the card associations. For any credit/debit card transaction, the merchant will accept a card from their customer. That card was issued by a bank! The issuing bank, when they made the card, decided what "type" of card they'd be issuing to their customer. It may have been a rewards card, a business card, a debit card - there are dozens and dozens of card types. But, once they chose that card type - it's set in stone. A Visa Rewards card is always a Visa Rewards card, and associated with every card, is a rate that the acquiring bank pays to accept that card. That's the interchange rate! It's what we, your provider, pays for any given sale.
You can think of interchange as the "buy rate" on any given card. It's what everyone pays. It doesn't matter where you go, every provider who accepts credit cards has to pay interchange back to the bank who issued the card. It's the way the system was designed.
Because interchange is a rate that everyone pays, if you're on an interchange-plus pricing model, it's very easy to compare the margins of your provider to a competitor. It's a model that is fully transparent, because it allows you to see how much money your provider is keeping! Typically, interchange rates should make up at least 70%-75% of your total bill, or more. And don't forget that everyone pays card-association fees, too! When comparing providers, you'll want to compare the margins above interchange - that's the part you have control over. Your provider doesn't make money on interchange or card-association fees, they have to charge a margin above that.
Curious about the rates? We get it. But beware, there's a lot of them! We encourage all merchants to familiarize themselves with interchange - see the interchange tables here.
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