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Interchange Pricing

What is Interchange?

As a merchant, you have likely heard the phrase “interchange” or “interchange rates” and are aware that you are charged a percentage rate for interchange. But, what you might not know are the details of interchange, and why these rates vary.

What is interchange and why is it charged?

Interchange is the fee charged for passing financial transaction information back and forth between you (the merchant), a payment processor (Tailored Transactions), the bankcard companies (Visa® and MasterCard®), and the banks that issue the credit and debit cards. This fee is imposed by Visa, MasterCard and Discover, not by Tailored Transactions. You pay this fee on every transaction you process.

Why do I need to pay interchange?

You pay these fees so issuing banks can recoup the costs of distributing credit, debit and prepaid cards to cardholders; pay for their marketing efforts and fraud monitoring, and defray the cost of other functions related to card issuance.

You may also be aware of assessment fees. Like interchange, assessment fees are imposed directly by Visa, MasterCard and Discover. But unlike interchange, money generated from assessment fees goes directly to Visa and MasterCard to cover their operating costs. Currently, Visa’s assessment fee is .110 percent, MasterCard’s assessment fee is .110 percent, and Discovers assessment fee is .105 percent.

What are the current interchange rates?

As of October 2015, there are over 500 interchange rates. The reason there are numerous interchange rates is because Visa, MasterCard and Discover do not have one set rate that applies to every industry or transaction type. The actual interchange rate that is charged is based on the way the card information is provided, the type of card being used, and the kind of transaction being made.

For example, rewards cards have higher rates than basic consumer cards, and mail order or phone transactions have higher rates than retail or in-person transactions. Visa and MasterCard typically adjust interchange rates twice a year in April and October.

To view the current interchange rates by Visa, MasterCard and Discover -- Click Here