What is Credit Card Interchange?

In a credit card transaction, there are more parties involved than just the customer and merchant. There is the credit card association (Visa, MasterCard, etc.), the financial institution from whom the customer received their card (card-issuing bank), the customer, the merchant, the merchant service providers, and the bank that the service provider represents. When a purchase takes place, the customer’s financial institution authorizes release of the funds. The funds are then transferred to the merchant’s bank account, minus the interchange fee.

An interchange fee is the “cost” of a credit card sale.

While this concept may seem a little confusing and vague, it’s quite simple. The interchange rate is determined by the credit card association—note that credit card associations that offer perks and incentives tend to have higher interchange rates, as those perks and incentives require a certain cost to operate. A typical interchange rate may look like this: 2.20%+$0.15. The first figure is a percentage of the sale, and the second number is a “per-sale” cost. Larger merchants can negotiate the cost of the credit card interchange if their volume of sales is higher, as well as their revenue per sale.

The interchange fee is typically divvied up between three different parties. A majority of the fee, known as a card association fee, goes to the card-issuing bank—about $1.75 of a $100 purchase. Nearly $0.10-$0.20 goes to the credit card association, and the remaining money goes to the merchant account provider.

So where do you fit in, and where does Vision Payments Solutions fit in?

As the merchant, you will be the recipient of a majority of the revenue. While the idea of these fees seems daunting, accepting credit cards is one of the most important ways to increase your profits, and appeal to a large customer base that relies on credit cards as their primary forms of payment. With millions of credit card owners and users, the best thing you can do is increase your customer reach, and accept the small fees as a part of processing credit cards.

Vision Payment Solutions will act as your merchant account processor, and oversee the credit card transactions and transferal of funds to your merchant bank account. We offer assistance in matters of merchant services, credit card payment processing, and merchant credit card processing. Visit www.visionpayment.com to learn more about our payment solutions, and our merchant account processing services!