n interchange rate is the rate a card network charges to cover the risk of doing business. All credit transactions involve risk because no physical currency is being exchanged, and an interchange rate is calculated to mitigate that risk incurred from fraud and the threat of the card network not being paid back by the cardholder as much as possible. Interchange rates are paid whenever a merchant processes a transaction and is usually presented in the form of a percent plus a few cents per transaction. Interchange rates are not regulated by any government entity, so they are set by the card networks themselves.
These interchange rates do change, twice a year in fact, and are generally released in April and October. This is because the payment processing industry is always evolving, and card networks have to keep up with spending trends. The rates don’t always increase, sometimes they decrease or remain the same, depending on several factors the card network considers and their judgement of the market.
The factors that go into the decision to adapt interchange rates include the risk of fraud, the rewards card networks offer cardholders, the cost of the transaction, and the industry in which the purchase is being made (example: a concert ticket is high risk, so it would have a higher rate than, say, a low-risk purchase of a meal at a restaurant). Payment processors add their own markup to cover their own risk of doing business.
Visa and MasterCard’s interchange rates are available to the public, without processor markup, so you can always stay up to date and informed when choosing your payment processor. Visa’s rates can be found here and MasterCard’s are here. To help merchants keep more of the money they earn so their business can grow, PayArc offers one of the best deals in the industry for low-risk businesses, so contact us today to find out if your business qualifies!
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