How Do I Understand The Interchange Fee Schedule for Visa?

When answering how do I understand the interchange fee schedule for visa, you should know that interchange fees are established by the individual credit card brands. These rates are the same for all merchants. Most providers pass these rates on to the merchant at no additional cost and they are non-negotiable. In other words, Visa has its own interchange fee schedule that applies to all merchants and these fees are detailed on their website.

Now that we’ve answered that question, you might very well be wondering: What exactly is an interchange fee? Good question.

Basically, an interchange fee is the portion of a credit card sale transaction that’s paid by the merchant’s acquiring bank to the card issuer’s bank for their part in a credit card transaction. As the merchant, you do not pay these fees directly; they are included in the fee structure you negotiate with your credit card processing company.

For merchants considering how do I understand the interchange fee schedule for Visa, they should consider the following factors:

  1. The type of card presented for payment.
  2. Where the card is being used (at what type of business or for what service).
  3. The way the card is processed.

Consider The Card Classification, Location, and Processing Methods

Classifications for credit cards include: basic credit and debit cards, rewards cards, corporate or business cards and international cards. Within each category, there’s a breakdown of what the interchange rate will be for each credit card type when presented at different places of business and for different services. Let’s look at some examples.

Example 1: You own and operate a women’s clothing store in a local shopping mall and you are concerned with how do I understand the interchange fee schedule for Visa, consider the following . A customer comes in and chooses three dresses totaling $250.00 and presents a basic Visa credit card as payment. The Visa interchange rate for a basic card type is 1.54% + $0.10 per transaction. To qualify for this rate, there is a specific list of requirements that must be met, as listed on the Visa website:

  • Cardholder and card present, signature obtained, single electronic authorization, merchant name, city, and state included in authorization.
  • Read & transmit complete magnetic stripe, transaction settled within 1 day of authorization, authorization response data included in settled transaction.
  • Clearing amount must equal authorization amount except for the following sic codes: 4121 (Taxicabs & Limosines), 5813 (Bars & Taverns), 7230 (Barber & Beauty Shop), 7298 (Health & Beauty Spas). This is to account for tipping in these business types.

So if your customer presents her basic Visa card for payment, and you swipe the card at your point of purchase terminal, and the information from the magnetic stripe matches the information at the issuing bank, and you get an authorization for the sale, and your customer signs the receipt, and the transaction is settled within the time stipulated for batching out and settling this classification of transaction, then you will pay $3.95 in interchange fees.

Example 2: Now, merchants asking how do I understand the interchange fee schedule for Visa should consider the same scenario with one difference – your customer presents a Visa category 1 rewards card. All the same requirements for a retail purchase must be met, but the interchange fees for this type of rewards card is 1.65% + $0.10 per transaction. So on a $250.00 sale, you will pay $4.22 in interchange fees.

Example 3: As these examples show, you pay a different interchange fee depending on the type of credit card presented and where it is being used. But the interchange rate is also affected by how the card is processed. For example, if your customer uses a basic credit card at your dress shop, but you batch out and settle the transaction 3 or more days after the original authorization you will pay an interchange rate of 2.70% + $0.10 per transaction. Because you did not meet the requirement to settle the transaction within 1 day of authorization, your interchange fee will be considerably higher. You will pay $6.85 in interchange fees.

Visa offers a comprehensive list of interchange fees on their website to help merchants answer the question of how do I understand the interchange fee schedule for Visa. Each type of card, used as each type of business, and processed in all the different ways possible are broken down in detail. As you can see from the examples above, your interchange rates can vary with each credit card transaction you process. So what can you do to keep your interchange costs as low as possible? Following a few basic practices can help.

  1. Swipe credit cards at a point of purchase terminal for the best rates in each category.
  2. If you are processing a card not present transaction, be sure you input all the information Visa requires for that category of card transaction.
  3. Batch out and settle your credit card transactions in a timely manner.

Following these 3 basic rules will help you maintain control over how much you pay out in Visa interchange fees.