The Entrepreneur Forum | Startups | Entrepreneurship | Starting a Business | Motivation | Success

Understanding Interchange when taking Payments for your business

Remove ads while supporting the Unscripted philosophy...become an INSIDER.

paymenthuddle

New Contributor
Nov 13, 2019
7
3
1
This is a Blog we wrote recently and I thought it was worth sharing with this group. If you take payments on your site or in person hopefully this post is of help to you.

The world of payments and payment processing can be a murky and confusing one. Most merchants are confused by ‘interchange’ settlement and its impact on the fees that they pay to accept credit and debit card payments. The card associations – Visa, MasterCard and Discover – assess other fees (assessments and dues) in addition to interchange to cover the costs of maintaining their system infrastructure and payment networks. Interchange is simply the fees paid by the merchant’s bank to the issuing bank, but also represents a large portion of the merchant costs for transactions.
Interchange will not be the same for each and every transaction that takes place though. The Interchange is determined on VARIOUS criteria – risk factor (merchant industry), the type of card that is used (AMEX, DISCOVER, VISA OR MASTERCARD) and the way the card is accepted (card present or card not present).

Adding to the complexity, there are additional costs - almost like paying a ‘toll.’ These ‘additional’ fees are tacked onto the cost of interchange. These ancillary fees could be associated with using a card ‘gateway’ to connect to a merchant processor. If a merchant uses an ISO as their merchant provider, that ISO needs to make money as well. This means ISO’s will typically charge higher transactional fees on top of interchange and can also charge ADDTIONAL fees embedded in the services i.e. - Customer Service/Statement Fees, or a PCI Compliance Fee. These fees are purely for profit to the ISO.

Many small business merchants are too busy to try and sort out what might be being charged by their processor today. When looking at most monthly merchant statements, reporting and calculations are cumbersome and confusing - even for a processing experts that understand this landscape. Many merchants have no bearing on what their true ‘effective’ rate they are paying is for card transactions.

As more and more consumers are trending towards cards for purchases, these merchant costs will continue to rise. Fortunately, there are opportunities to partner with companies specializing in merchant card costs and able to help suggest possible alternatives in the marketplace. Larger merchants tend to benefit from the services that a merchant consultant can provide, small to mid-size businesses could be benefactors of this as well.
 

Don't like ads? Remove them while supporting the forum. Subscribe.

JordanAvery

New Contributor
Jul 24, 2020
2
1
1
Miami
It's right, and indeed there are a lot of misunderstandings on this case. As a small business owner, I can say that in the beginning, it was pretty hard for me to clarify certain issues. Customers are not satisfied with the growing costs, but it's inevitable and this will continue to happen steadily.
 

jaminson

PARKED
Mar 7, 2020
7
0
4
19
London
Thanks for clarifying this aspect. As a small business owner, I had various confusion about some of the work transactions and payments. Customers often don't understand why we don't accept credit card payments in general or we charge a fee for the transaction. For example, I use a Neteller Mastercard from Neteller MasterCard: fees, virtual deposit card and limits | Baxity and I'm more than satisfied with how this works for me, and I can make all of my payments very easily. Not all the people are informed about the interchange aspects though, that's why sometimes there are confusion.
 
Last edited:

Create an account or login to comment

You must be a member in order to leave a comment

Create account

Create an account on our community. It's easy!

Log in

Already have an account? Log in here.

Sponsored Offers

  • Sticky
MARKETPLACE Fox's Web Design Guide: Earn $100K this year (Yes, 2020!) and Go Fastlane
How do I sell to a different country with an accent? And a foreign number. Cold e-mails don't...
  • Sticky
MARKETPLACE Kill Bigger Incubator
Hey @Cruiser I just shot you a reply! Amazing product BTW!
  • Sticky
MARKETPLACE Lex DeVille's - Advanced Freelance Udemy Courses!
Well, we made it halfway through the year. Don't know what the rest'll bring, but it's gonna be...
  • Sticky
FEATURED! Introducing... WEALTH EXPO$ED, A Short Story By MJ DeMarco
Not really a teaser but it does employ a fictional story, so that is similiar. This upcoming...
  • Sticky
MARKETPLACE You Are One Call Away From Living Your Dream Life - LightHouse’s Accountability Program ⚡
Dropping a quick note in here to say... if you are on TFL, you are part of an elite group of...



Forum Sponsor

sponsor

New Topics

Fastlane Insiders

View the forum AD FREE.
Private, unindexed content
Detailed process/execution threads
Monthly conference calls with doers
Ideas needing execution, more!

Join Fastlane Insiders.

Top Bottom