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Interchange credit card processing | A simplified overview

Posted by Alex Neir on Thu, April 19, 2012 @ 02:50 PM
Interchange Credit Card Processing

Understanding how interchange affects your business’s credit card processing rates is the single most important thing you should know. Interchange credit card processing is the least expensive way to process credit cards.

Interchange represents the wholesale price of accepting credit cards. The credit card issuing banks and credit card associations sell interchange rates as wholesale to the processing community. The processing community then marks up interchange in order to make a profit. So, understanding how that markup is determined can improve your ability to negotiate the very best rates available for your business type.

What is Interchange?

Interchange is network of interconnected financial institutions / banks. Every single bank that issues credit cards to consumers is connected to the interchange network. Connection to the interchange network ensures that the account associated with credit card the bank issues can be accessed by Visa, Master Card, Discover etc. Account access is necessary for money verification (approval) and money collection (settlement).   

The credit card issuing banks and the credit card associations control interchange. As a group they determine the fee paid to access the interchange network. The fees are broken down into no less than 185 categories based on the industry of the merchant, how the transaction is being captured and what type of credit card is being used. These fees represent the wholesale rate for accepting credit cards. The amount above interchange that your business pays to process credit cards tells you if your pricing is good, bad or horrible.

Would you like to know if you are overpaying the wholesale interchange rate?

Tags: Interchange Fees, Interchange Pricing, Interchange Credit Card Processing

Interchange pricing vs. tiered pricing | Pay attention to the margin

Posted by Alex Neir on Mon, April 09, 2012 @ 03:59 PM
Interchange Pricing

Interchange pricing and tiered pricing are two popular models used to calculate the rates and fees that your business will be charged to accept credit cards. Both interchange pricing and tiered pricing use interchange to determine the total fees charged for the month.

The term interchange is used to describe the rates that are charged by the credit card associations to accept a piece of plastic as payment. The interchange rates are set by each individual association, Visa, Master Card, Discover, Diners, JCB etc. Interchange rates are associated to each individual transaction according to:

  1. Industry of the merchant (retail, restaurant, supermarket,  etc)
  2. Transaction method used to accept the payment (swiped / keyed in)
  3. Credit card type (debit, credit, rewards card etc.)  

Here are the published interchange rates for both Visa and Master Card:

It is helpful to look at the differences between the two pricing models with an actual sales example. The example given below is for a retail merchant that is swiping 3 different credit cards through a terminal. The qualified rate applies to a swiped check card. The mid-qualified rate applies to a swiped rewards card and the non-qualified rate applies to a swiped corporate card.

Tiered PricingRateVS.Interchange PlusRate
Qualified Rate 1.48% Qualified Rate Interchange + 0.30%
Mid Qualified Rate 2.29% Mid Qualified Rate Interchange + 0.30%
Non-Qualified Rate 3.05% Non-Qualified Rate Interchange + 0.30%

Example sales with tiered pricing

QualificationSaleRateActual InterchangeMarginFee Paid
Qualified Rate $25 1.48% 0.95% 0.53% $0.37
Mid Qualified Rate $25 2.29% 1.15% 1.14% $0.57
Non-Qualified Rate $25 3.05% 2.10% 0.95% $0.76

Example sales with interchange plus pricing

QualificationSaleRateActual InterchangeMarginFee Paid
Qualified Rate $25 1.25% 0.95% 0.30% $0.32
Mid Qualified Rate $25 1.45% 1.15% 0.30% $0.36
Non-Qualified Rate $25 2.40% 2.10% 0.30% $0.60

The fundamental difference between the two pricing models is that the rate in the tiered model is set at a predetermined level. The interchange plus model fluctuates based on the actual amount charged from Visa / Mastercard / Discover (aka Interchange).

It is important to pay attention to the margin. The margin is the difference between the rate that is charge by interchange and the rate your business is billed. With a tiered pricing structure there is quite a bit of margin built into each transaction. So as the number of transactions raises over the month so does the total margin paid. With Interchange plus the margin is pre-negotiated, stays the same for every transaction and effectively lowers your overall costs.

Tags: Interchange Fees, Interchange Plus Pricing, Interchange Pricing

Merchant Account Virtual Terminal | Transact payment from anywhere

Posted by Alex Neir on Mon, April 02, 2012 @ 01:41 PM
Virtual Terminal

A merchant account virtual terminal is a cloud based application that allows credit card payments to be transacted from any internet enabled device. This includes laptops, desktops, smartphones and tablets. The beauty of the virtual terminal is that it is accessible from the internet so you can accept payment from anywhere there is access to the internet.

When you sign up for virtual terminal access your business is given a unique user name and password to access the virtual terminal website. Depending upon how you are accessing the virtual terminal there are a few devices that can be incorporated with your account to enable your business to swipe credit cards. Swiping credit cards ensures you receive the very best credit card processing rates. Devices include a MagTek external card swiper that connects to a laptop or desktop via USB cable. There are also a number of swipe devices that are compatible with smart phones.

In addition to credit card acceptance, the virtual terminal also includes a number of value added functions that are not available through a traditional credit card terminal.

  • Recurring Billing
  • Electronic Check Acceptance
  • Electronic Invoicing
  • Robust Reporting
Recurring Billing

Recurring billing allow you to set up automatic billing to happen at a predetermined intervals each month, quarter or on an annual basis. The parameters are fully customizable to meet your specific business needs.


Electronic Check Acceptance

Electronic check acceptance gives your business the ability to accept check payments by simply entering the customers checking account number and routing number.  This additional functionality helps you cut time and expense associated with traveling to the bank to deposit checks.


Maxx Invoicing

Electronic invoicing is a convenient feature that lets you create an invoice that is directly emailed to your customer. Within the invoice is a link for the customer to visit and pay their invoice either by credit card or check.


Virtual Terminal Reporting

Reporting gives you access to every transaction processed through the virtual terminal. Transaction information is held in the virtual terminal for 7 years and is accessed through an easy to use reports tab.


If you would like take advantage of a virtual terminal solution for your business please provide us with your contact information and a representative will be in touch shortly.

Virtual Terminal Set Up

Tags: Electronic Check Acceptance, Virtual Terminal, Recurring Billing, Electronic Invoicing