What Is interchange?

For each credit card transaction processed, merchants have to pay a fee called interchange. In a way, interchange is the price for accepting credit card payments. Depending on your company’s DNA (transaction volume, vertical, card processing environment etc.), you may be able to optimize your credit card interchange rates significantly.

Why Is It Important To Optimize Credit Card Interchange Fees?

Interchange is usually calculated based on a percentage of each transaction. These fees are designed to cover things such as fraud, charge-backs and technology growth. As an example (and example only, this in no way represents any merchant or any pricing Paragon has been a part of) a merchants may be charged a fee of 2.95% plus $0.10 every time a customer pays by credit card. This number can seem small, but when applied to thousands of payments each month, the total cost adds up quickly.

How Can You Optimize Interchange Fees?

Some merchant services providers place may place your interchange rates in tiers. The fee your business is charged for each transaction can vary according to different factors, such as the type of payment method. Here are a few tips for optimizing interchange:

• Follow excellent processing habits: Credit card companies expect your employees to protect cardholder data by following POS-terminal prompts carefully. To qualify for the best rates, don’t skip information on verification prompts such as zip code and CVV#.
• Close batches promptly: Avoid waiting over 48 hours to settle credit card batches. Settling batches at the end of each business day can help you qualify for better rates.
• Capture additional customer information: B2B companies can qualify for more attractive interchange tiers by providing additional customer information with each transaction. In addition to basic billing information, include Level II and Level III data such as tax ID, PO number or invoice number.

Working with the right payments provider is essential for qualifying for the best fees. At Paragon Payment Solutions, we work with both our software providers and their customers to make sure interchange is optimized appropriately and merchants are getting the best rate possible.