Interchange What?

There are a lot of terms in the payment processing industry. We are the first to admit our industry is full of scammers. Those scammers love to gloss over the terms and not explain what they mean. They will sometimes twist things to the point where you feel foolish to ask. Here's the first of our explanations of what some of those pesky payment processing terms mean.

There are three different ways that payment processors charge and set up their rates. Since the other two are based off what Interchange is, we are going to start with Interchange.

Interchange is simply the cost of the card being run through the machine. Merchant Processors will also exchange the word "interchange" with "cost" or "wholesale". There is a cost that is associated with every payment card a person has. It is determined by whoever issues it. If it's a no frills program, it will be a lower cost. If it's a cost that gives you points back, cash back, free mileage, serves you breakfast in bed, it will be a higher rate. There are thousands of cards that are issued, and thousands of rates to go with them.

The important thing to know is what the "Average Interchange Rate" is. Currently (08/2021), the average is about 1.81%. Again, it could go lower or higher depending on the program that is on the payment card but that's a good ballpark figure to start with.

When you're signing up for payment processing and they say it's "Interchange Plus" (IC+), they are meaning it's the cost of the card being run through the system plus the cost of the program.

For example. IC + .25% means you are paying the interchange rate plus .25% which on average equals about 2.06% for every transaction.

We will go over in future posts the other ways payment processing gets charged but this is a great base to make the other two ways more understandable.

Feel free to book a consultation if you have any questions about your payment processing. The link is on the bottom of the page.