It’s that time of year again when card brands such as Visa and Mastercard announce their Interchange rates and fee updates. Typically, this means an increase in rates for most merchants. Let’s delve into the key aspects of these updates and how they affect your credit card processing fees.
Visa and Mastercard usually revise their interchange fee plans twice a year, in April and October. These updates often include new rate categories and adjustments to existing ones, impacting both card-not-present and physical transactions.
After a two-year delay due to the Covid-19 pandemic, Visa and Mastercard raised their interchange fee schedules in April 2022, with significant increases for eCommerce transactions. This move was met with criticism from the business community. However, the 2023 updates brought only minor changes to the interchange fee schedule.
What are Interchange Rates and Assessments?
Merchants accepting credit cards must pay interchange fees, assessment fees, and processing fees. These fees, set by payment networks, represent the base rate for accepting card payments. Only the fees charged by the payment processor, known as the “mark up,” are negotiable.
Interchange fees, updated annually, are complex due to the variety of merchant categories, card types, and transaction modes. The banks issuing the credit cards collect these fees, benefiting the most from rate increases. CMSPI estimates that the new charges from the 2023 updates will cost merchants an additional $502 million annually.
Important Card Brand Changes for Fall 2023
Visa Interchange Updates:
- Credit Card Surcharging Cap Decrease: Visa has reduced the surcharging cap from 4% to 3%, effective April 15, 2023. Non-compliance with Visa’s Core Rules can result in significant fines.
- Visa Digital Enablement Fee: Starting October 2023, Visa will charge a Digital Enablement Fee of 0.0075% for all Card-Not-Present transactions.
- Non-Chip Enabled Terminal Authorization Fee: Visa will impose a $0.17 non-compliance fee for transactions processed at terminals not supporting EMV.
- Incremental and Estimated Authorizations: Visa will implement fees for estimated and incremental authorizations, effective November 1, 2023.
- Misuse of Authorization and Unmatched Clearing Fees: Starting January 1, 2024, Visa will charge fees for misuse of authorization and unmatched clearing transactions.
- New International Interchange Programs: Effective October 13, 2023, Visa introduces new international interchange programs for consumer and commercial transactions.
Mastercard Interchange Updates:
- Authorization Optimizer Fee: Mastercard introduces a new fee for declined subscription transactions, offering an alternative retry time.
- B2B Wholesale Travel Program: A new program to reduce fees for travel sector businesses making international payments.
- MC Installment Payment Products: New fees for Installment Payment programs, effective November 1, 2023.
The rise in credit card usage has made them a preferred payment method globally, with 5.6 billion cards in circulation in 2023. Their convenience, global acceptance, and rewards programs contribute to their popularity.
Maximizing Interchange Rates with a Reliable Merchant Service Provider
Accepting credit card payments is crucial, but the associated fees can be burdensome. A reliable Merchant Service Provider (MSP) can offer competitive rates and quality customer service. An experienced MSP can maximize your interchange rates by using appropriate MCC codes, ensuring efficient transaction routing, and more.
Bankcard International Group is committed to transparent and competitive solutions in credit card processing. We use interchange-plus pricing for its straightforwardness and transparency. If you’re seeking cost-effective merchant services with dependable support, contact us today.
