What Are Interchange Fees And How To Calculate Them

What Are Interchange Fees And How To Calculate Them

What Are Interchange Fees And How To Calculate Them

When calculating the revenue your business has brought in over a certain period, you will need to account for any money that has gone out as well. Some of these payments are fairly straightforward, such as monthly rental, inventory replenishment, and employee wages.

However, when it comes to credit card payments, there is one more factor to the equation: interchange fees. Although it can seem like a small amount for each individual transaction, it can quickly start to add up. Read on to find out more about what these fees are and how you can calculate them!

Understanding Interchange Fees

Once a credit card payment has been initiated, the process of obtaining payment will go like this:

  • Your bank will send a payment request to the customer’s bank
  • Once the customer’s bank has checked and verified the transaction, they will authorize the amount to be released to you
  • The amount should be received by your bank. If the transaction has been flagged for any reason, a rejection will come through

Because of how fast and convenient these transactions can be made today, an interchange fee is charged by the card issuer. In many cases, the interchange fee is passed on to each individual bank, providing them with an incentive to promote this particular card to customers!

How Much Is the Interchange Fee?

Although this interchange fee is paid by you and requested by the customer’s bank, there is no standard charge across the board. This fee is typically a percentage of each transaction plus a fixed amount and is decided by the payment network.

Below are some factors that can influence the amount of interchange fees you pay:

  • The number of transactions completed each month – for instance, if you process a high number of transactions, you may be able to negotiate for a lower percentage fee
  • Type of payment card used and the security protocols involved
  • Where the transaction is made – payments made across borders may incur a higher fee
  • If the payment is made in person or online

When you first set up your POS system, your card issuer should have gone over the applicable interchange fees with you. If you are unsure what this is, you can always contact your bank and/or card issuer to find out the current rates you are paying. Understanding the fees you are paying can help you to better manage payments and increase your profit margin!

Come to Millennium Payment Systems for the Solutions You Need

Are you looking for a reliable payment system to use in your business? When you make use of a POS system, you can reap many benefits, including automatic calculation of sales tax and adjustment of inventory items. On top of that, loyalty points can be deducted and payments processed automatically. With a selection of hardware and software to take your pick from, our team can make the most suitable recommendations for your business today!