When You Know How to Optimize Credit Card Interchange Rates, You’ll Know How to Keep Costs Down
Earlier this month, Visa announced they were planning the biggest interchange rate changes in a decade – and unless you know how to optimize credit card interchange rates for your business, you risk paying more in Visa fees. A lot more.
Read on to learn about Visa’s upcoming interchange rate changes and find out how VelocIT can help you potentially cut those costs.
What Is Interchange?
Interchange is the cost you pay to run credit cards at your company and those costs, known as interchange fees, are non-negotiable. In other words, interchange fees are the depressing cost of doing business in the modern world, which requires you to accept plastic.
Interchange fees are extremely complex with literally hundreds of cost structures and, as you’ve probably already noticed, they inexplicably change from transaction to transaction.
The fees are based on a wide range of factors, including:
- Transaction size
- Payment acceptance environment
- Merchant industry
- Card type
And, according to the February 2020 announcement from Visa, those costs are about to get a bit more complex, starting in April.
What Are the Visa Interchange Rate Changes?
In an effort to make Visa cards even more useful to consumers (and therefore more profitable to Visa, Inc.), the popular payment network has decided to implement the biggest changes they’ve made in a decade.
Here are some highlights:
- Fees will go up or down, based on the merchant and how the consumer pays for the purchases
- eCommerce and phone transactions (card-not-present) will have higher rates
- Retailers in real estate, education, and health care will have lower rates
- For a $100 transaction on a traditional Visa card, fees will raise 9¢ to $1.99 per transaction
- For the same transaction ($100) on a premium Visa card, fees will raise 10¢ to $2.60 per transaction
- Rates are likely to change from bank to bank because banks and payment networks can negotiate more competitive deals with retailers, featuring one-on-one pricing agreements
While each of these changes only costs a few more pennies per transaction, you understand how much — and how quickly — those pennies can add up. After all, merchants like you are collectively spending more than $100 billion as the cost of accepting electronic payment methods. Those fees hurt.
Fortunately, there’s a way you can optimize credit card interchange rates for your business, so you’re not stuck paying more than you should.
How Can You Optimize Credit Card Interchange Rates at Your Company?
Since interchange rate calculations are so complex, your best bet as a merchant is to try to qualify each transaction you run for the lowest rate possible. That’s because, when you qualify for the lowest rate, you’ll pay the minimum in fees.
The easiest way to qualify for the lowest rate is to make sure you optimize credit card interchange rates on every transaction – and the best way to do that is to send as much data as possible to the card-issuing bank (Chase, Citi, Capital One, etc.)
As the card issuers see it, the more data you send, the less likely it is that you or the consumer are committing fraud. The card issuers can lose money when they have to reverse fraudulent charges – so your job as the merchant is to determine what data the card-issuing bank wants from you and then give them that data.
Sounds easy… but the catch is that you have to know all about Bank Identification Numbers (BINs) to transmit the right data. Unfortunately, the only people who know everything about BINs are credit card issuers like Chase and payment networks like Visa – and neither of them want you to optimize credit card interchange rates because optimization shrinks their profit margin.
Actually, there’s one other type of person who knows everything about BINs and interchange optimization: advanced payment solutions providers like VelocIT.
Save Big with VelocIT
The first of the new Visa rate changes will go into effect in April, so right now is a great time to start thinking about how you’ll handle these changes at your business.
While you’re thinking, consider the fact that, as a VelocIT customer, you can:
- Get paid faster with next-day funding
- Flexibly invoice clients using web portal- or email-based “Pay Now” buttons
- Reduce liability with secure new technologies including tokenization, Bolt P2PE, and EMV terminals
Plus, since VelocIT offers free terminals, free installations, free support, more than 400 extended solutions for Sage 100cloud and an Acumatica-certified app, a responsive in-house development team, and new features that we release (for free!) every few months, there’s a lot to gain by switching to payment processing from VelocIT.