Visa is Introducing a Huge Interchange Fee Increase in 2021

Business Interchange Fees are set to increase by 20% in April 2021

Can you avoid or offset this increase?

Background:

Businesses that accept credit card payments are expecting a big increase in processing fees, as of April, 2021.

In an update that was originally slated for 2020, Visa is changing the rules that govern how credit card processing fees are calculated. 

Processing fees are complex, and the semi-annual changes implemented by Visa, Mastercard, and American Express only serve to complicate them further.

2021 will see one of the biggest changes in years.

Annually, US businesses pay over $180 billion per year in processing fees. And roughly $63 billion of that is the result of errors and overcharging. In large part, it is the complex nature of the fees that causes this.

Beyond the constant rule changes, many other factors contribute to the opaque nature of credit card processing fees. There are numerous entities and banks involved in processing a credit card transaction … all of whom benefit in some way from higher fees. And each entity has its own (often extensive) set of categories and sub-categories of fees involved.

The changes being made by Visa in 2021 will primarily affect an area known as Interchange Fees.

Interchange Fees benefit the bank that issued the credit card to the card-holder. They are used to fund reward and cash-back programs offered by the issuing bank. Interchange Fees do not directly benefit Visa or the credit card processing company.

But Visa has profound sway over how those fees are assessed.

Impact of Visa's Interchange Fee Increase:

How much will this increase a company’s overall processing fees?

It depends.

Companies that accept a higher percentage of B2B transactions (meaning their clients are other businesses), or using specific business Visa cards, should expect an increase based on this volume.

On average, these merchants will see a 20% increase.

But everyone is likely to see some amount of fee increases in 2021, no matter what.

Mastercard has made similar moves recently, and AmEx is expected to do so in the near future.

Can the Visa Interchange Fee Increase be Avoided?

To offset these increases, micro-adjustments will need to be made on the back end of the merchant account, which could greatly insulate the fee structure from the coming changes.

These micro-adjustments will be different for every business, and depend on a number of factors.

To determine the best approach for adjusting any merchant account, extensive expertise is required. 

Verisave, an independent merchant account auditing company, specializes in this these adjustments and has seen a substantial increase in clients preparing for this increase, and hoping to offset the additional costs.

In most cases, the costs can be offset to a large degree, or avoided entirely.

For those interested in evaluating the financial impact of the Visa increase, use the worksheet on this page.

Additional Details

As always, expect these increases to be complicated and opaque. Here are some things to watch for:

 

Standard Interchange Increase Levels:

  • 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, Processors tend to increase their fees at the same time
  • They do this because you are already expecting an increase
  • So, they think you won’t notice a little bit extra going out the door
  • And they rarely make this clear or obvious
  • Note: some Processors are more up-front and fair than others … if you use one of these Processors, kudos. They are rare.
  • 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

Financial Impact Worksheet

How will this impact your business? We can tell you.

We just need to know a few things first: