What is interchange when referring to your merchant account pricing? This is a common question that once understood can help you to drastically reduce your credit card processing costs.
What is interchange?
Simple – it’s wholesale. Wholesale is the price the manufacture sells the product to the retailer at. The retailer marks up the price and then sells the product to the consumer. This same thing happens with credit card processing.
The credit card associations (Visa, Master Card, Discover, American Express, etc) and the issuing banks (Chase, Capitol One, etc) set the wholesale price for processing credit cards. This wholesale price is called interchange.
The processor then marks up the wholesale price or interchange price and that is the pricing you see on your merchant account statement each month. Just like every other wholesale to retail industry there are no set standards on the mark up for the credit card processing industry. Therefor if you do not understand the margin that your processor has built into your rates it’s hard to know if you are over paying for the service. Here is a detailed analysis of how the interchange margin is calculated.
No one can pay less than wholesale or interchange to process credit cards, so the closer you get to interchange the better deal you have received.
Would you like a wholesale or interchange pricing quote? Simply provide us with some information on your business and a representative will generate a pricing proposal.