As a controversial fee update is rolled out to merchants nationwide, many businesses scramble to minimize these additional costs.
If your business accepts credit card payments, you pay a variety of fees every time you process a transaction.
One of these is called an interchange fee.
Interchange Fees do not go to your processor … they go back to the bank that issued the credit card to your customer.
In April, Visa made some unexpected changes to the rates they charge, primarily affecting business interchange fees, which will increase business credit card processing fees by up to 20%.
Mastercard, Discover and American Express initiated similar fee updates at the same time.
Visa had been planning to introduce these rate increases in 2020.
Due to the pandemic, they elected to delay the increases until April 2021.
After further pressure from Congress, Visa once again announced a delay, pushing the increases into 2022.
However, in April 2021 Visa moved forward with a portion of the contested fee increases anyway. This was unexpected and unannounced.
How much will this increase your processing fees?
Companies that mostly have B2B transactions (meaning your clients are businesses that use specific business Visa cards) will see an increase in their processing fees.
Companies that have a high proportion of consumer transactions (B2C) will not be as greatly impacted, but even they are likely to see some fee increases this year.
What can be done?
To offset these increases, adjustments will need to be made on the back end of your merchant account.
These will be different for every business, and depend on a number of factors.
To determine the best approach for your merchant account, we offer a no-charge merchant account analysis.
You can request that here.
As always, expect these increases to be complicated and opaque. Here are some things to watch for:
Standard Interchange Increase Levels:
- The card types most affected by this will be: Visa Signature B2B and Infinite B2B, Visa Level 2 Business Tier Cards, and Business Downgraded Cards
- As a basic example: when you process a customer’s payment of $1000, the Standard Visa fee will go up from $29.50 to $31.50
- The same $1000 transaction on a Visa Business Card would see a fee increase from $25.00 to $30.00
- THESE EXAMPLES REPRESENT THE SIMPLEST LEVELS OF THE INCREASE SCHEDULE … IT GETS MUCH MORE COMPLICATED
How Your Processor Will Respond:
- Whenever Visa or Mastercard increase Interchange Fees, some Processors tend to increase their own fees at the same time
- These Processors time their planned increases to coincide because you are already expecting an increase
- And they rarely make this clear or obvious, so it comes across looking like part of the same card-brand increase
- Note: some Processors are more up-front and fair than others …
- But even a fair processor will not address the Interchange Fee increase on your behalf
Plan of Action:
- Most merchants believe Interchange cannot be reduced
- This is incorrect
- Depending on your mix of card and transaction types, there are a number of steps that can be taken to avoid or offset increases like this
- Contact Verisave to determine the best plan of action