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Why is the Cost of Accepting Payments Online So High Part 2: Managing Interchange

In our last post, we explored the fees that contribute to the cost of accepting payments: interchange, dues/assessments, and processing fees. Interchange comprises the majority of these fees, so let’s take a deeper dive into best practices for managing interchange for both card-present and card-not-present transactions.

Card-Present Transactions

Managing interchange for card-present transactions is a bit more straightforward than for card-not-present transactions. Following these guidelines can help ensure that you are effectively managing interchange fees:

  • Make sure your business is properly classified and categorized in the right industry segment
  • If the card is present, always swipe the card
    • You will pay more in interchange if you key in the card number at the point-of-sale
  • Upload your transactions daily to help ensure you meet interchange guidelines
  • Remember that authorization amounts must equal deposit amounts
    • This is an important distinction for restaurants and other businesses where tips might be included
Card-Not-Present Transactions

You can’t take a set-it-and-forget-it approach to interchange management in a card-not-present environment.  Interchange is dynamic and requires close management when physical cards are not able to be swiped.

Every card-not-present transaction is subject to interchange qualified, mid-qualified, and non-qualified rates. In order for your transactions to receive the qualified rates, you must:

  • Receive valid authorizations
  • Ensure that authorization amounts and settlement amounts are of equal value
  • Include authorization codes (when applicable)
  • Settle transactions within two business days

If these guidelines aren’t met, your transactions may be subjected to downgrades or surcharges and you may have to pay the mid-qualified or non-qualified interchange rates for those transactions. 

There are many factors that are out of your control when it comes to interchange. You can’t control the types of payment cards your customers choose to pay with, but you can control how your business is classified and your approach to authorization and settlement.

Contact us to learn more about the costs of accepting payments.

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