April 2010 Interchange Rate Adjustments

Well, it's that time of year again.  Typically in April and October of each year, Visa and MasterCard make adjustments to Interchange Rates.  What's that you say, you don't know what Interchange Rates are?  Shame on you for not understanding because you're paying it every time you take a credit card.  Well, at least this April, there weren't any significant changes in rates, however, MasterCard came out with a whole bunch of new "categories" that could have an affect on you and your bottom line.

You see, as a merchant that accepts credit cards for the payment of goods or services, you are charged a Discount Rate by your service provider.  This provider, or merchant services processor, pays card issuing banks an Interchange Rate and pays either Visa or MasterCard, an access and assessment fee.  All of these figures represent their cost basis for providing this service to you.  On top of all these fees, the processor adds their markup and presents it to you in the form of the Discount Rate.

For sake of discussion here let me give you a quick example.  Currently, the Interchange Rate for a Visa Debit Card is .95% + $.20 (last time around, October of 2009 it was 1.03% + $.15).  This is one of the few changes for April 2010.  So, a $50 debit card transaction would cost about $.67.  This fee ultimately gets paid directly to the financial institution that issued the debit card.  On top of that is a Visa Assessment fee of .0925% and total Access fees of about $.02.  So, to cut to the bottom line here, the total "costs" is 1.0425% + $.22.  Take a look at your most current statement and see what you're paying for swiped debit cards without capturing a pin number (that's a whole other ball game).  If you're priced on 3 Tier pricing, it will be your Qualified Rate.  If you're on a 4 Tier pricing, it's your 1st Tier.  And, if you're on Cost Plus Pricing it will be a specific line item showing the total breakdown (or at least it should).

The bottom line here is that you need to become more thoroughly educated regarding this ever-increasing cost center in your business.  Listen, your service provider doesn't want to tell you all this stuff.  All they want to do is just provide the service and hope that you don't ask too many questions.  Trust me, I spent a lot of years in this business and built a tremendous, loyal, customer base.  It was accomplished by establishing mutually rewarding long-term relationships.  Look, the economy is pretty lousy now and isn't showing signs of getting much better any time soon.  You owe it to yourself and your business to learn more about this cost center as it is continually having a growing impact on your bottom line.  You can slowly learn more and apply it along the way, by just subscribing to this blog or coming by often.  Or, you can head on over to my website right now by CLICKING HERE and get the crash course to increased profits.  The choice is yours!