Merchant Account Fee Basics: Visa and Mastercard Interchange Rates

Merchant account processing is a topic that involves so many variables, it is difficult to fully understand. Understanding credit card processing involves a variety of topics ranging from Visa, Mastercard, AmEx, and Discover interchange rates to processing options like Chase Paymentech, TSYS, Elavon, and more. This is why so many companies pay for convenience through high merchant fees — because they simply do not have the time to really digest all the info that comes with payment processing.

However, if you know enough about the credit card industry (like we do), you can take one look at your merchant account to know where you are overspending and start making changes to reduce your monthly merchant fees.

Start With The Basics – Visa And Mastercard Interchange Rates

An interchange rate is the percentage of a credit card purchase the merchant pays for the convenience of accepting credit card payments. Each major credit card company sets their own rate and assigns that rate to the merchant. This rate is largely based off of your MCC (merchant category code). The MCC was originally created by the IRS to simplify taxes for business owners. When aiming to reduce your merchant account fees, first make sure you’re classified correctly.

Visa and Mastercard each represent a different credit card network. They are two of the largest credit card networks used in the United States. However, these card networks do not issue their own credit cards but instead rely on what we call “the issuing bank” to do so.

American Express and Discover work differently than Visa and Mastercard. They are each closed-loop credit card networks that distribute cards, process payments, and acquire fees.

The issuing bank is typically the bank with which you applied for a credit or debit card (a local credit union, Chase, Wells Fargo, Bank of America, etc.). Because a number of entities participate in the processing of a credit card payment, they each take a portion of your merchant account fee. The interchange rate of Visa and Mastercard will have a large impact on your monthly fees.

Constantly Changing Interchange And Network Rates

Card networks change their fees on a regular basis. However, they are not obligated to notify you of these changes. You will only notice if you pay attention to your ever-increasing monthly merchant fees. However, as network fees make up only 5% of your company’s merchant account fees, the subtle rising of monthly fees can remain unnoticed for quite some time.

Also undergoing continual changes twice a year, Visa and Mastercard interchange rates vary based on which credit card network you’re using as well as the level of interchange you’re being charged. Along with the changing rates, the way a merchant’s product is purchased can change what they pay in fees. A merchants will pay more in fees when a payment is applied at the point of sale by punching in the card numbers versus swiping the magnetic strip through the POS device.

With so many variables involved, it is important to work with a merchant account savings firm that can help your company stay on top of the latest interchange rates. Verisave auditing experts manage card network rates and changes. They are also experienced in achieving significant savings in processing rates without having to switch processors.

Receive A Free First Analysis

To help your company start saving, Verisave is offering a free merchant account audit. In three easy steps, your company could start to save anywhere from 25%-35% in merchant account fees. So contact us today and see what we can do for your company.

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