Interchange Update April 2021

Every year just with the Day Light Savings time Visa, MasterCard, Discover and American Express will make adjustment to the interchange reimbursement tables. Last year these major card networks decided, amid the pandemic, to hold off on adjusting interchange fees until April of 2021. What make this year stand out is the amount of the increase. Some estimates are a 20% increase for some business types.

View Network Changes

​First let’s explain what is interchange? Interchange fees are set by the card networks for acquiring banks to pay issuing banks. These cost are passed on to merchants. Interchange is also known as interchange reimbursement as it reimburses the card issuer for the use of their card as used at the business for accepting the payment.  These fees vary depending on the card. For example a debit card typically carries a very low reimbursement cost, while a travel and entertainment cards will be higher reimbursement cost due to points and other benefits the card holder can earn. These rewards programs are to lure the consumer to use these cards, which in turn helps the bank / card issuer. In the end the merchant accepting the cards will pay these cost one way or another.
 
A deeper dive into this shows adjustments for Visa, MasterCard are expected to bring in $889 million in net new interchange revenue annually for U.S. issuers, according to estimates from CMSPi, a payments consultancy with a U.S. office in Atlanta. The rate changes will vary by merchant category, but in general e-commerce merchants are expected to absorb increases while travel-and-entertainment and low-ticket value, quick-service merchants could see some relief. Below is a chart that reflect the changes. Most changes are significant.
 
While no one can control what the card networks will charge a business to accept credit card, we can help you to be sure that any mark up over these cost are competitive. Also we can eliminate any unnecessary fees or junk fees. Also a business can consider a Cash Discount Program whereby the cost for accepting credit cards is passed back to the card holder.

Issuing Bank: The bank or financial institution that issues the card to the end user

Acquirer Bank: (also merchant bank or acquirer) is the financial institution that maintains the merchant’s bank account. The contract with the acquirer enables merchants to process credit and debit card transactions. The acquiring bank passes the merchant’s transactions along to the applicable issuing banks to receive payment.

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