--- title: "Padded Interchange Fees: How to Spot Them In Your Merchant Statements" description: In part 1 of this unethical billing series, learn about Padded Interchange, discover how its presented on merchant statements, and how to avoid it. image: https://blog.payjunction.com/hubfs/BLOG/FEATURED%20IMAGES/interchange-padded-unethical-billing.svg --- [tel:1-800-601-0230](tel:1-800-601-0230) 800-601-0230 - Features - Solutions - Developers - [Pricing](https://www.payjunction.com/payments/pricing.html) - Resources [See a Demo](https://www2.payjunction.com/tour-payjunction) Features - EXPLORE PRODUCTS [No-code Payments Integration®](https://www.payjunction.com/payments/no-code-payments-integration.html) [ZeroTouch Terminal](https://www.payjunction.com/payments/smart-terminal.html) [Portable Terminal](https://www.payjunction.com/payments/portable-credit-card-reader-terminal.html) - ACCEPT PAYMENTS [Invoices](https://www.payjunction.com/payments/electronic-invoices.html) [ACH Electronic Checks](https://www.payjunction.com/payments/ach-payments.html) [SmartSurcharge®](https://www.payjunction.com/payments/smart-surcharge.html) [Cards on File](https://www.payjunction.com/payments/store-credit-card-info.html) [Rapid Refunds](https://www.payjunction.com/payments/credit-card-refund.html) [Recurring Billing](https://www.payjunction.com/payments/recurring-payments.html) [Ecommerce](https://www.payjunction.com/payments/ecommerce-merchant-services.html) [Mobile App](https://itunes.apple.com/us/app/payjunction/id1324839420?ls=1&mt=8) - EXPLORE CAPABILITIES [Overview](https://www.payjunction.com/payments/payment-processing-solutions.html) [Integration Marketplace](https://integrations.payjunction.com/) [Remote Signature](https://www.payjunction.com/payments/signature-capture.html) [Multi-Location](https://www.payjunction.com/payments/enterprise-payments.html) [Sales Reports](https://www.payjunction.com/payments/sales-reports.html) [Search and Export](https://www.payjunction.com/payments/transaction-history-search.html) [Customization](https://www.payjunction.com/payments/custom-payment-software.html) Solutions - [Veterinary Streamline payment workflows and get paid faster with up-front deposits and payment schedules for high-cost procedures. 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Billing statements are intentionally complex to keep customers from finding hidden fees. This series of posts will cover different ways providers practice unethical billing. To kick things off, we’re going to cover padded Interchange and how to avoid it. But first, a little refresher on [Interchange (IC](https://blog.payjunction.com/interchange-definition)). ## Payment Processing Demo Schedule 15 minutes with a payments expert Get a customized PayJunction product walk-through Understand requirements and pricing Determine your SAVINGS! GET DEMO NOW ## Interchange: A Quick Review In the simplest terms, IC is the wholesale cost to run a transaction. It is determined by card brands (Visa, MasterCard, Discover, Amex) and paid by Merchant Account Providers, but the cost is passed onto their customers (that’s you). IC typically depends on the card type and method of transaction (swiped or keyed), and varies depending on the level of risk or reward. For example, a swiped credit card would have a lower IC cost than a keyed credit card because there’s less risk of fraud when swiping. The same goes for rewards cards: An airline miles card would have a higher IC cost than a regular credit card. As risk or reward goes up, so does the IC cost. ![Interchange-plus-rate-1 (2)](https://blog.payjunction.com/hs-fs/hubfs/BLOG/BLOG%20IN-LINE%20IMAGES/Interchange-plus-rate-1%20(2).jpeg?width=600&name=Interchange-plus-rate-1%20(2).jpeg) Card brands modify IC twice a year in April and October. All Merchant Account Providers are charged the same IC rates. It’s even across the board so no provider has an advantage over another, regardless of size (find out more about all types of merchant account fees in [chapter 3 of our ebook](https://guides.payjunction.com/merchant-account)). Card brands' IC rates are posted online for all providers and businesses to view. - [Visa IC fees](https://usa.visa.com/support/small-business/regulations-fees.html#1) are publicly posted and determined by card type and transaction method. - [MasterCard IC fees](https://www.mastercard.us/en-us/about-mastercard/what-we-do/interchange.html) are publicly posted and determined by card type and transaction method. - [Discover IC fees](http://www.discovernetwork.com/home/data/acqIntchgLanding.html) are also determined by card type and transaction method, but are not available to the public. - [Amex IC fees](https://www209.americanexpress.com/merchant/services/en_US/accept-credit-cards?inav=menu_business_merchgetaccount#profession) are publicly posted but determined by business industry type, then broken into tiers. In exchange for providing the product you use to accept payments and customer support, providers add a markup on each transaction. This is called [Interchange-plus pricing](https://blog.payjunction.com/interchange-plus-pricing-flat). It’s intended to be the most transparent pricing model, but if you’re in the hands of the wrong provider, you may fall victim to deceptive billing practices. ## So What's Padded Interchange? Padded IC means your provider is hiding an additional markup in the IC cost. Yes, that means **your provider is blatantly lying to you**. With Interchange-plus pricing, your bill should reflect the costs published by the card brands. Unethical providers know most customers won’t go searching for these published rates, so they add a hidden markup to make an extra buck. Here’s an example: ![Padded-Interchange](https://blog.payjunction.com/hs-fs/hubfs/BLOG/BLOG%20IN-LINE%20IMAGES/Padded-Interchange.png?width=760&name=Padded-Interchange.png) - True IC cost for Visa Rewards 1 is 1.65% + $0.10, but is listed as 1.80% + $0.10 on the statement - This provider hid a markup of 0.15% in the discount rate Providers display IC in various ways, so your statement may look different from this. (I told you statements were complex!) This is just one example of how providers can hide fees they claim to not charge. Padded IC is an [unethical billing practice](https://blog.payjunction.com/topic/unethical-billing) that breaks trust for all providers. ## How to Avoid Padded Interchange As we’ve mentioned, determining if you’re a victim of padded IC can be a difficult task. We recommend working with a truly transparent provider if you’re looking to start accepting credit cards. If you currently accept credit cards, and are wondering whether your provider is giving you the runaround, you can cross-check current IC costs with your merchant statements, or use our nifty [Merchant Service Provider assessment checklist](https://guides.payjunction.com/merchant-service-provider-assessment). If you’re not up to that challenge, get a statement analysis by a professional to weed out any shady billing. Don’t let providers take advantage of you! ## Find out if you're a victim of padded Interchange. Have you had an issue with unethical billing from your provider? Ever get charged padded Interchange? Tell us about your experience below. *Editor's Note: This post was originally published in November 2017 and has been updated for comprehensiveness and accuracy.* [Unethical Billing](https://blog.payjunction.com/topic/unethical-billing) [Credit Card Processing](https://blog.payjunction.com/topic/credit-card-processing) --- ##### [![How to Comply with Visa’s New Fraud-Fighting Rules](https://blog.payjunction.com/hubfs/BLOG/FEATURED%20IMAGES/visa-category-1-decline-codes.svg) How to Comply with Visa’s New Fraud-Fighting Rules](https://blog.payjunction.com/visa-category-1-decline-codes) ##### [![Interchange Downgrades: What They Are and How to Avoid Them](https://blog.payjunction.com/hubfs/BLOG/FEATURED%20IMAGES/interchange-downgrades-unethical-billing.svg) Interchange Downgrades: What They Are and How to Avoid Them](https://blog.payjunction.com/interchange-downgrades-unethical-billing) ###### About Author ![Picture of Ursula Librizzi](https://blog.payjunction.com/hs-fs/hubfs/Ursula_Librizzi.jpg?width=200&height=200&name=Ursula_Librizzi.jpg) ### Ursula Librizzi Ursula is the sales and marketing operations manager for PayJunction. She oversees daily marketing tasks and liaises between the sales and marketing departments. ###### Related Posts ## [![Interchange Downgrades: What They Are and How to Avoid Them](https://blog.payjunction.com/hubfs/BLOG/FEATURED%20IMAGES/interchange-downgrades-unethical-billing.svg) Interchange Downgrades: What They Are and How to Avoid Them Many Merchant Account Providers charge unnecessary fees or have unfair contract terms and conditions, as reported in our unethical practices blog series. Some providers take it a step further by failing to educate business owners about how to qualify for the best transaction rates, which unfortunately results in “Interchange downgrades” that can really add up. Worse yet, some providers make so much money from these downgrades that they hide them in confusing line-item details on statements.](https://blog.payjunction.com/interchange-downgrades-unethical-billing) ## [![Seven Ways Auto Dealerships Can Lower Payment Acceptance Costs](https://blog.payjunction.com/hubfs/BLOG/HERO%20IMAGES/controlling-costs-auto.svg) Seven Ways Auto Dealerships Can Lower Payment Acceptance Costs The costs of accepting payments at automotive dealerships can add up quickly, especially with high-ticket down payments, major repairs, and expensive parts. Inefficient business processes only amplify these expenses, increasing operational costs and straining cash flow. If not addressed, profits can stall.](https://blog.payjunction.com/seven-ways-auto-dealerships-can-lower-payment-acceptance-costs-payjunction) ## [![Are You Paying the Lowest Possible Debit Card Fees?](https://blog.payjunction.com/hubfs/BLOG/FEATURED%20IMAGES/debit-card-fees.svg) Are You Paying the Lowest Possible Debit Card Fees? You may sometimes wonder if the payments industry has your best interest in mind. At PayJunction, we believe in ethical billing, as we’ve outlined in our ongoing unethical billing series. Our goal is to educate the business community about unfair billing practices.](https://blog.payjunction.com/debit-card-fees) ## Meet a Payment System You’ll Love - ###### FEATURES [No-code Payments Integration®](https://www.payjunction.com/payments/no-code-payments-integration.html) [ZeroTouch Terminal](https://www.payjunction.com/payments/smart-terminal.html) [Portable Terminal](https://www.payjunction.com/payments/portable-credit-card-reader-terminal.html) [Invoices](https://www.payjunction.com/payments/electronic-invoices.html) [ACH](https://www.payjunction.com/payments/ach-payments.html) [SmartSurcharge®](https://www.payjunction.com/payments/smart-surcharge.html) [Cards on File](https://www.payjunction.com/payments/store-credit-card-info.html) [Recurring Billing](https://www.payjunction.com/payments/recurring-payments.html) - [Ecommerce](https://www.payjunction.com/payments/ecommerce-merchant-services.html) [Customization](https://www.payjunction.com/payments/custom-payment-software.html) [Remote Signatures](https://www.payjunction.com/payments/signature-capture.html) [Rapid Refunds](https://www.payjunction.com/payments/credit-card-refund.html) [Multi-Location](https://www.payjunction.com/payments/enterprise-payments.html) [Sales Reports](https://www.payjunction.com/payments/sales-reports.html) [Search and Export](https://www.payjunction.com/payments/transaction-history-search.html) [Mobile App](https://itunes.apple.com/us/app/payjunction/id1324839420?ls=1&mt=8) - ###### BUSINESS SOLUTIONS [Auto Dealers](https://www2.payjunction.com/automotive-merchant-services) [Veterinary](https://www2.payjunction.com/payment-processing-veterinarians) [Dentistry](https://www2.payjunction.com/payment-processing-dentists) - ###### RESOURCES [Product Overview](https://www.payjunction.com/payments/payment-processing-solutions.html) [Integrations](https://integrations.payjunction.com/) [Blog](https://blog.payjunction.com/) [Guides](https://guides.payjunction.com/) [Support](https://support.payjunction.com/) [Service Status](https://status.payjunction.com/) [Tutorials](https://blog.payjunction.com/tag/pj-university/) [API](https://www.payjunction.com/payments/payment-api.html) - [Trust Center](https://trust.payjunction.com/) [Request a Demo](https://www2.payjunction.com/payjunction-demo) [Pricing](https://www.payjunction.com/payments/pricing.html) [About Us](https://www.payjunction.com/payments/about.html) [Careers *HIRING*](https://www2.payjunction.com/careers) [Press](https://media.payjunction.com/) - ###### RESOURCES [Integrations](https://integrations.payjunction.com/) [Guides](https://guides.payjunction.com/) [Tutorials](https://blog.payjunction.com/tag/pj-university/) [API](https://www.payjunction.com/payments/payment-api.html) [Request a Demo](https://www2.payjunction.com/payjunction-demo) [About Us](https://www.payjunction.com/payments/about.html) [Careers *HIRING*](https://www2.payjunction.com/careers) [Press](https://media.payjunction.com/) [Trust Center](https://trust.payjunction.com/) [Service Status](https://status.payjunction.com/) - ###### BUSINESS SOLUTIONS [Auto Dealers](https://www2.payjunction.com/automotive-merchant-services) [Veterinary](https://www2.payjunction.com/payment-processing-veterinarians) [Dentistry](https://www2.payjunction.com/payment-processing-dentists) ##### 800-601-0230 SIGN UP FOR OUR NEWSLETTER  Become a better advocate for your business. 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