Are You Sure You’re Paying True Interchange?

Are You Sure You’re Paying True Interchange?

If your business is on Interchange pricing, you may think you have the most transparent rate plan. This is a fair assumption, so long as you’re being charged true Interchange.

There are a few ways providers can sneak in extra fees or adjust your rates to undermine the benefits of Interchange pricing.

4 Signs You’re Not Receiving True Interchange Pricing

Non-Qualified Interchange

With a Tiered rate plan, transactions fall into one of three categories (Qualified, Mid-Qualified and Non-Qualified) based on the risk or reward associated with running the transaction. This isn’t how processing costs are determined on an Interchange-plus model.

With Interchange-plus pricing, your provider charges you the Interchange — or wholesale cost — for the transaction plus a flat markup. However, in an analyses of competitors’ statements, we’ve stumbled upon a fee called “Non-Qualified Interchange,” which borrows phrasing from the Tiered plan.

Non-Qualified Interchange is a completely false fee since Interchange rates aren’t bundled into set pricing categories. Our team of analysts saw this fee total as much as $489.31 on a merchant statement.

Interchange Not Refunded

If your business is on Interchange pricing, you’re entitled to a refund of your Interchange costs when a customer returns a purchase. Unethical providers withhold these reimbursements from customers on Interchange-plus too, assuming the customer won’t notice or isn’t aware of this benefit.

This can result in a significant loss in revenue for businesses with high transaction volume. Say your business processes $100,000 each month and you have a 5 percent return rate. Assuming an average Interchange rate of 2%, this would total $1,200 in withheld funds.

Padded Interchange

The credit card brands set and adjust Interchange biannually. Current rates are published in their guides online (except for Discover). Here are helpful links to each for quick reference:

  • Visa: Determined by card type and transaction method.
  • MasterCard: Determined like Visa, by card type and transaction method.
  • Discover: Determined like Visa and MasterCard, but not publicly available.
  • American Express: Determined by business industry, then broken into tiers.

Many unethical providers assume their customers don’t know that Interchange is standardized or accessible for reference, and therefore inflate its cost. This undermines all the fairness and transparency touted by Interchange-plus pricing.

Padded Interchange Statement Snippet

In the above example, the true Interchange cost for Visa Rewards 1 is 1.65% + $0.10, but is listed as 2.50% + $0.10 on the statement. This provider hid a markup of 0.85% in the discount rate.

Padded Dues and Assessments

Dues and assessments are set by the card brands and cover the following costs: network operations to process transactions, marketing expenses, price and rule setting and research into new fraud-prevention technologies.

These fees are charged to Merchant Account Providers and passed onto their customers. They, too, remain the same for each provider and are publicly posted. Visa, MasterCard and Discover charge between 0.11% - 0.13% for dues and assessments. Amex charges 0.15% for dues and assessments.

Dues and assessments are a monthly fee applied to each card brand’s transaction volume. However, again because providers assume their customers won’t check to verify these rates, many pad these percentages to boost their profits.

Padded Dues and Assessments Snippet

This provider claimed MasterCard’s assessment fee was 0.19%, however the true rate is between 0.11% and 0.13%. The provider hid in a markup of 0.06% - 0.08%, increasing the cost by as much as $13.54 more for just that card issuer.

While Interchange-plus truly is the most transparent rate plan for businesses, it’s vital that you work with an ethical Merchant Account Provider to ensure you’re receiving true Interchange pricing. These common, deceptive tactics only serve to boost your provider’s bottom line, and can take a financial toll on your business over time.

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Have you spotted any of these unethical billing practices on your merchant statements? Let us know how that’s going in the comments section below.

About Christina Lavingia

Christina is the marketing manager for PayJunction. She oversees editorial voice and style across departments.

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