As a business owner, you probably have enough on your plate without having to learn how Credit Card Interchange fees work. It’s not complicated; the good news is. There are many interchange fees. However, it is essential to know that interchange refers to the wholesale rate charged by banks to each other to process credit card transactions. It is usually two percent of the transaction amount.
There are ways you can help reduce the amount that you pay for interchange rates set by card companies.
Every year, review your charges.
Visa and MasterCard update their fees and processes at least twice per year, usually in April and October. Many times, your current provider will add additional rate increases to the Interchange adjustments. To “catch” hidden rate increases, call another provider and fax your merchant statement.
Use the Interchange Pass-Through Program
Merchants want to pay interchange fees as low as possible in order to get the best credit card processing rates. Merchant accounts that use Interchange Pass Through pricing apply processing fees by adding a small percentage to the Interchange Rate for each transaction. All dues and assessments are passed directly at cost. This allows you to pay only the interchange rate and a small mark-up to your merchant service provider. Sometimes, your current provider will add additional rate increases to the Interchange adjustments. To “catch” hidden rate increases, call another provider and fax your merchant statement.
When possible, avoid downgrading.
If a transaction is charged at a rate that is higher than what your business might qualify for, it’s called a downgrade. To reduce fraud and get the lowest rate, swipe your card at the point-of-sale device whenever possible. If you own a service or repair shop, you might consider a wireless credit card processing terminal. You may also want to look into newer solutions like RoamPay and PayWare mobile that allow you to use your mobile phone as a point-of-sale device.
Get the correct billing information.
To avoid Card Not Present Transactions downgrades, ensure that you have the correct billing information. Credit Card Companies use the Address Verification Service for Domestic Cards (AVS) to verify that the billing information you provide matches the Card being used. Always keep the Card’s Billing Address, including the Postal Code and the Card Verification Code. For Visa, MasterCard, and Discover, the Card Code is the three-digit number at the bottom of the Signature Panel. It is the 4th digit number located on the right-hand side of American Express cards, above the five digits.
You must ensure that your point of sale device is programmed correctly.
Contact your Merchant Service Provider immediately if your Point-of-Sale Device does not prompt you to enter your Billing Address and Card Code. This will allow them to update your device to send the information to the Credit Card Companies. Transactions can also be affected if they are not settled or batch within 24 hours of receiving an Authorization. Nearly all point-of-sale devices can auto-close or auto-close at a specific time every day. Contact your Merchant Service Provider immediately if your device doesn’t have this option.
Training Your Staff
It is crucial that you train all employees, even if you are not directly responsible for processing credit card transactions at your company. This will help avoid any downgrades. You should regularly observe your cashiers and monitor transactions. Also, you should carefully review your month-end processing statements.