How Interchange Fees Impact Your Business—and How to Reduce Them
For businesses accepting credit card payments, interchange fees are often the biggest chunk of processing costs.While they may seem unavoidable, many businesses end up paying more than necessary due to processor markups, transaction downgrades, and inefficient payment setups.
Understanding how interchange works, what factors impact your rates, and how to lower costs can help businesses save thousands in unnecessary fees each year.
1. What Are Interchange Fees?
Interchange fees are set by card networks like Visa, Mastercard, Amex, and Discover and paid to the issuing bank(the bank that issued the customer’s card). These fees compensate banks for processing transactions and assuming fraud risk.
Every credit and debit card transaction includes three main fees:
💳 Interchange Fee → Paid to the bank that issued the customer’s card.
💳 Assessment Fee → Paid to Visa, Mastercard, or other card networks.
💳 Processor Fee → Paid to the payment processor (this is where markups happen).
💡 Interchange rates vary based on multiple factors, but most businesses don’t realize they’re overpaying due to preventable inefficiencies.
2. What Affects Your Interchange Rate?
🔴 Type of Card Used
Debit cards have lower interchange fees than credit cards.
Rewards and corporate cards have higher fees because they fund points programs.
🔴 Transaction Type
Card-present (in-store) transactions have lower interchange rates than online or manually keyed-in transactions (which carry more fraud risk).
Recurring payments & subscriptions may have unique interchange categories.
🔴 Merchant Category Code (MCC)
Different industries have different interchange rates.
For example, grocery stores and gas stations typically have lower rates than luxury retail or high-risk industries.
🔴 Level 2 & Level 3 Data for B2B Transactions
Businesses processing commercial or corporate card payments can qualify for lower interchange rates by providing additional transaction details (Level 2 or Level 3 data).
💡 Understanding these factors helps businesses qualify for the lowest possible interchange rates.
3. How to Reduce Interchange Fees & Save Money
✅ Use Interchange-Plus Pricing (Instead of Tiered Pricing)
Some processors bundle interchange fees into a tiered pricing structure, which hides the true costs and leads to overpayment.
Interchange-plus pricing separates costs, ensuring full transparency.
✅ Ensure Transactions Qualify for the Lowest Interchange Rate
Use chip or contactless payments instead of keyed-in transactions to reduce fraud risk.
For B2B sales, provide Level 2 or Level 3 data to qualify for lower rates.
✅ Minimize Chargebacks & Fraudulent Transactions
Implement CVV verification, address verification (AVS), and 3D Secure for online payments.
Chargeback prevention tools help reduce dispute-related interchange downgrades.
✅ Work With a Consultant to Optimize Processing Setup
Many businesses don’t realize they’re overpaying on interchange fees due to poor processor agreements, incorrect MCC classifications, or lack of data optimization.
A payment consultant can audit statements, uncover savings, and negotiate better processor terms.
💡 A well-optimized payment setup ensures businesses only pay the interchange fees necessary—nothing more.
4. How PlutosPay Helps Businesses Reduce Interchange Fees
At PlutosPay, we help businesses:
🔹 Audit payment statements to uncover unnecessary interchange markups.
🔹 Ensure transactions qualify for the lowest possible rates.
🔹 Identify processor pricing structures that maximize savings.
🔹 Implement fraud prevention strategies to avoid penalty fees.
💡 The result? Lower costs, more transparency, and optimized payment processing.
5. Key Takeaways
✅ Interchange fees are a major cost of payment processing, but they can be optimized.
✅ Factors like transaction type, MCC, and card details impact interchange rates.
✅ Using interchange-plus pricing and fraud prevention can lower costs.
✅ PlutosPay helps businesses reduce unnecessary interchange fees and optimize payments.
💰 Want to ensure you're not overpaying on interchange? Let’s talk.
Conclusion: Stop Overpaying on Interchange Fees
Many businesses assume interchange fees are fixed costs—but that’s not entirely true. By optimizing transaction methods, choosing the right pricing model, and eliminating processor markups, businesses can significantly reduce processing expenses.
At PlutosPay, we help businesses navigate interchange pricing, eliminate hidden costs, and ensure every transaction is processed at the lowest possible rate.
📩 Contact us today for a free payment processing audit.