EnablePay offers true interchange wholesale credit card merchant services processing to their merchants! To better understand the advantages of interchange pricing and how a merchant can benefit from our pricing model I have provided as brief of an explanation as possible of what interchange is and why it works the way it does.
EnablePay provides the most transparent process for debit and credit card processing services to merchants – an innovative approach to merchant services that makes card processing directly available to merchants at WHOLESALE rates. The rates our merchant clients pay are the actual wholesale interchange rates!
The advantages of this processing model to the merchant are tremendous. Making the wholesale interchange pricing open to all merchants regardless of size eliminates the inflated rate structure, and excessive fees charged by other companies.
What I would like to do here is provide an explanation of what interchange is and how it works.
Here are the basics.
- MasterCard, Visa, and Discover Card are competing card associations and have different Interchange fee pricing and qualification schedules.
- MasterCard, Visa, and Discover Card Interchange fees are the single largest component of your merchant discount rate pricing.
- All banks and merchant processing companies operate from the exact same Interchange fees, Dues and Assessment costs.
- Card Association Interchange is the fee paid by the merchant to the cardholder’s issuing bank for processing a transaction through the system.
- Interchange fees are priced at the transaction level and depends on the combination of your merchant category code (MCC), the method by which you accept the card, the card product you accept and sometimes even varies by transaction size.
- You will likely have card transactions throughout any given day all qualifying at different Interchange category levels.
- The Interchange pass through pricing model from EnablePay is by far your best option. Don’t settle for any other rate structure.
Organization of Payment Networks
A four party payment system like MasterCard and Visa is characterized as an open loop system with explicit Interchange categories. These four parties are:
1) Card Issuer; 2) Cardholder; 3) Merchant; 4) Acquirer.
The four party payment system:
- The cardholder’s issuing bank markets and issues payment cards to consumers, and extends credit to cardholders from the time a purchase is made until payment is due.
- The cardholder uses a payment card to purchase goods and services at millions acceptance locations around the world.
- The merchant accepts payment cards in exchange for goods and services, and receives increased sales.
- The acquiring bank enrolls merchants into programs that accept payment cards.
In the United States, payment card networks coordinate the activities of thousands of financial institutions that issue cards, millions of retail locations that accept them, and several hundred million consumers that use them. This coordination may include the collective setting of certain prices and other network rules.
- Card issuers are banks that offer cards to consumers and determine the level of any fees or finance charges their customers see on their regular statements.
- Merchants also have banks, called acquirers that process card payments on their behalf. Merchants pay their acquirer for these services by accepting a merchant discount.
- Bankcard Associations coordinate through Networks, Rules & Pricing. In a 4 party system, with so many participants, coordination is essential.
- Understand that the interchange fees go to the Bank that issued the card to the consumer. Not to the card association.
Bankcard Association’s Dues & Assessments Fees
Dues, Assessments, and Access fees comprise the component of merchant discount that goes to the Card Associations. An open payment network like MasterCard and Visa allow many banks to participate. The association builds and maintains much of the infrastructure: the lines and switches required to route transaction information between different acquiring and issuing banks. The associations specify that for each transaction an interchange fee be paid to the bank issuing a card by the bank acting as the acquirer for the merchant.
Dues, Assessments & Access Fees represent the percentage rate and transaction fee charged on the sale that the card associations make to pay for their role in:
- Operating the network
- Establishing the rules
- Setting pricing
- R&D (develop new technology, combat fraud)
- Marketing/Branding
Interchange Links
The transparency of EnablePay’s simply pass through Interchange with our low fixed monthly management fee to cover the service delivery costs of network communications, risk management, customer service, account funding, and reporting is your best and most honest pricing method. My hope here is that by having a better understanding of what interchange is and how it works you will better understand how to compare services, and monitor your credit card processing expenses.
Here are some links to what the interchange categories and fees are;
My opinion is that these official sites don’t go far enough in their explanation. I have links here for two other charts which in my opinion offer a better working explanation on how interchange categories are utilized.
As always if you have any questions or comments please contact me Ronnie Lynch at rlynch@enablepay.com
For a FREE no obligation cost analysis of your current processing statement please complete the information on my quote page www.saveyouamint.com/quote
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