Debit card transaction rates and fees are usually cheaper than credit card transaction fees, but it is still important to understand what they are and exactly how much they are costing your business. Some debit transactions cost less, depending on the type of debit transaction (PIN vs. Signature), card brand, and ticket size.

PIN Debit is (Generally) More Expensive Than Signature Debit

It is important to note that running PIN debit transactions costs more in interchange than signature debit transactions. This is because PIN debit transactions must be routed through a PIN debit network, which charge debit network fees. Alternatively,signature debit transactions are routed through the card brand’s network, and therefore do not charge debit network fees. Instead, the card brands charge debit interchange rates, which tend to be cheaper for small-ticket transactions.However, since PIN debit fees are primarily flat fees and the interchange rates are generally lower, if a merchant runs more large-ticket debit transactions than small-ticket ones, PIN debit can actually be cheaper in the long run.

Debit Interchange Rates – Regulated vs. Unregulated

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Due to the Durbin Amendment, passed in 2011, debit interchange rates and fees are divided into two categories: regulated and unregulated. For a bank to fall under the “regulated” category, they must be worth more than $10 billion in assets, while the opposite is true for the unregulated category–if the issuing bank has less than $10 billion in assets, they fall into the “unregulated” category. For regulated debit, all PIN transactions are 0.05% + $0.21, with a fraud adjustment of $.01 for higher risk transactions. For unregulated PIN debit, see the chart below.

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MasterCard is the second-most used credit card worldwide, and as a merchant you probably accept it if you accept credit and debit card payments. As of October 19, 2019, MasterCard has updated their interchange rates as outlined below.

US Region MasterCard Consumer Credit Rates

MasterCard’s Consumer Credit Rates separates transactions into different “programs” and then interchange is decided based on both program category and by type of credit card. These credit card “types” encompass five categories:

The rates are displayed in the table below:

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US Region MasterCard Unregulated Consumer Debit and Prepaid Rates

The Durbin Amendment, passed in 2010 as part of the Dodd-Frank law intended to lower debit card interchange fees, differentiated between “regulated” and “unregulated” debit. Unregulated debit refers to debit cards issued by banks with less than $10 billion in assets, as those banks are considered higher risk. As a result, debit card interchange tends to be a little bit higher for unregulated debit as opposed to regulated debit. The following table shows the interchange rates for MasterCard’s unregulated consumer debit and prepaid program:

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US Region MasterCard Regulated Consumer/Commercial Debit and Prepaid Rates

In contrast with unregulated debit, regulated debit means that the issuing bank has more than $10 billion in assets. As they are considered lower risk than banks that do not, these rates are lower than the unregulated debit rates:

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US Region MasterCard Commercial Rates – Small Business Credit

MasterCard has an interchange rate program for small businesses with a company credit card. Some of the credit cards in this category include the Bank of America Business Advantage card, which is a Business Core card; the CitiBusiness/AAdvantage card, which qualifies as a Business World card; and the US Bank Business card, which is considered a Business World Elite card. These rates are determined based on both the program and the level of the credit card:

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US Region MasterCard Commercial Rates – Unregulated Commercial Debit/Prepaid and Large Market Credit

Mastercard commercial cards offer employers options to track employee spending via expense management, reporting, and card controls. These cards also offer integrated travel booking and management and up to 20% off on purchases commercial operations need, like office supplies. Mastercard even makes note on their website that using a commercial debit/prepaid card or large market credit card reduces payment processing expenses. For unregulated commercial debit/prepaid and large market credit cards, the interchange rates are dependent upon the program they are being used for:

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US Region MasterCard PIN Debit Rates

The following image shows MasterCard’s PIN debit rates. PIN debit rates apply instead of the previous debit tables, as they come into play when a business chooses to make customers input their PINs when making a debit transaction:

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US Region MasterCard ATM Rates

The following image shows MasterCard’s ATM Rates. The minimum quarterly transaction threshold is reviewed quarterly based on an issuer’s ATM transactions settled during the prior calendar quarter for the next subsequent quarter. The tier qualifications are effective in the second month of the next subsequent quarter. An issuer that qualifies for a tier based on their first quarter transactions (January-March), they will qualify for the new tiered rate commencing in May.

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t PayArc, we understand how vital it is to help merchants stay compliant within the Payment Card Industry’s Data Security Standards. We’ve all seen the headlines about giant companies being hacked and their customers’ credit and debit card information being sold on the Dark Web, so we know how scary it can be to have to be responsible for consumer data. That’s why we’ve partnered with ControlScan to help our merchants stay PCI-compliant and keep their customers’ trust.

ControlScan offers four major avenues for PCI Compliance: self-assessment, vulnerability scanning, compliance and security educational materials, and consulting services. They also offer access to live support through their portal, in the event that you need help with anything.

PCI 1-2-3 Self-Assessment Program

ControlScan describes their 1-2-3 self-assessment program as “like someone taking you by the hand and leading you through a dark forest”. That dark forest is the PCI self-assessment that most merchants can attest to, as only very large companies must undergo a formal QSA Assessment. It can be an extremely confusing and complex process, however, so ControlScan provides merchants with a communication portal with access to all the tools necessary to evaluate their PCI-DSS compliance.

External Vulnerability Scanning

The PCI DSS requires that external vulnerability scans be conducted at least once every three months on externally facing systems. The ControlScan PCI External Vulnerability Scanning Service will help you check for cross-site scripting, SQL injection, remote file inclusion and other vulnerabilities, determine where the issues are occurring, schedule and modify scan timeframes, and send vulnerability information to third parties to assist with compliance efforts.

Security Awareness Training

Another requirement of the PCI DSS is the regular education of company employees on security awareness. ControlScan offers a Security Awareness Training Service online, where you can pick the relevant courses to help your employees understand the security risks specific to your business. This training service comes complete with quizzes, certificates, and activity reports to help you keep track of your employees’ education.

Security Consulting Services

ControlScan also offers a security consulting service that helps business develop, maintain, and regularly test secure systems. This service also provides you a team of senior security consultants to advise you and your employees in how to make your business PCI compliant.

n 2006, due to the ubiquity of online shopping and lack of security around a new form of credit card use, American Express, MasterCard, Visa, Discover, and JCB International founded the Security Standards Council to combat the threat of cardholder data theft. This council drafted rules for merchants and payment processors, designed to protect cardholder data and keep everyone safe from fraud. The PCI-DSS—the Payment Card Industry Data Security Standards—are regulations that all merchants must stay compliant with in order to accept credit cards.

4 Levels of Compliance

Level 1:

This is considered the highest level of security. Merchants who must comply with Level 1 do more than 6 million Visa or Mastercard transactions annually. However, Visa may use their discretion to deem any merchant Level 1 depending on perceived risk. Level 1 is the only level where in-person assessments by a Qualified Security Assessor (QSA) and network scans of the merchant must be conducted on a yearly basis.

Level 2:

Merchants who must comply with Level 2 do between 1 million and 6 million Visa or Mastercard transactions annually. Unlike Level 1 merchants, Level 2 merchants, along with merchants belonging to Levels 3 and 4, do not have to be assessed by a QSA. Instead, merchants can assess themselves using the PCI questionnaire. The merchants who belong to the bottom three levels also must conduct a quarterly network scan and submit an attestation of compliance form.

Level 3:

Merchants who must comply with Level 3 do between 20,000 and 1 million Visa or Mastercard transactions annually.

Level 4:

Merchants who must comply with Level 4 do less than 20,000 Via or MasterCard transactions annually.

Staying Compliant

No matter what PCI level your business belongs to, PayArc is here to help. We ourselves are Level 1 compliant, so we know how important it is to protect cardholder data. We have partnered with ControlScan to keep the PCI-compliance process as simple as possible for our merchants while also being ahead of the game in security.

Want to know more? Click here to learn more about PayArc’s relationship with ControlScan and how it can benefit your business.

Business Impacts

Merchant portfolios may need be reviewed to prepare profitability models that support these interchange rate changes.

Visa

Canada Region

Changes to Performance Tier 1 Fee Program for Visa Debit Transactions

Visa will modify the description of the existing Canada domestic Performance debit fee programs.

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Changes to Performance Tier 1 Fee Program for Visa Consumer Credit Transactions

Visa will modify the rates and descriptions of the existing Canada domestic Performance credit fee programs.

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Changes to Domestic Interchange Rates

Visa will modify the rates to existing Canada domestic interchange programs that apply to purchase and credit voucher transactions for Visa consumer credit products.

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US Region

Changes to Interchange Fee Programs for Visa Consumer Transactions

Visa will modify the rate and description for the existing U.S. Supermarket Credit interchange program.

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Changes to Business and Commercial Fee Descriptors and Rates

 Visa will modify the rates and descriptions of existing business, corporate and purchasing interchange programs.

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Changes to Business Credit Interchange Fee Programs

Visa will modify the rates and descriptions of existing business credit interchange programs.

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Mastercard

New Mastercard Enterprise Solution Wholesale Travel Program Product Codes—Program Name

Mastercard is expanding the Wholesale Travel Program by introducing 5 new commercial B2B credit product codes. The existing Wholesale Travel Program is being renamed to support the changes as Mastercard B2B Product.

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2020-2021 Revised U.S.Region Interchange Programs and Rates for Assurance Framework

Mastercard is modifying the rates for existing U.S. domestic Consumer and Commercial interchange programs.

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Discover

Discover Rate Changes

Discover is modifying several interchange rates for consumer debit, consumer credit and prepaid card products.

isa changed the dispute process for chargebacks in 2017, due to the high volume of chargebacks they encounter. Visa’s overall goal is to resolve disputes before they happen, or at least soon after. Their chargeback resolution process consists of five steps, and it is intended to streamline the process, save time, and cut down on invalid disputes.

Pre-Dispute

The Pre-Dispute stage has two parts: Visa Merchant Purchase Inquiry and Associated Transactions. The Visa Merchant Purchase Inquiry is a program within Visa’s dispute platform, VROL (Visa Resolve Online). It consists of the following nine points:

The Associated Transactions part of the Pre-Dispute step is aimed to prevent the escalation of the chargeback if action has already been taken. For example, if a merchant has already credited a customer back for the disputed amount, then Visa will consider the dispute resolved.

Dispute Submission

The next step of the dispute process is Dispute Submission. The first part of Dispute Submission is Streamlined Processing: determining whether the chargeback is the result of Fraud and Authorization or Consumer and Processing Errors and acting accordingly.

Fraud & Authorization: Visa will determine whether or not a charge was fraudulent. Under certain conditions, acquirers and merchants can respond to the ruling. Those conditions are:

• Cardholder no longer wishes to dispute
• Compelling evidence
• Credit processed
• Invalid dispute

Consumer & Processing Errors: Issuer banks will be required to fill out an enhanced Dispute Questionnaire so that Visa can obtain all necessary information and move on to the next step, Dispute Response/Pre-Arbitration.

The second part of Dispute Submission is Dispute Rights Identification/Edits. Visa collects as much information about a disputed transaction as possible with the goal being to make the final decision themselves. However, if all information is collected and Visa still does not know how to decide, the dispute moves on to the next step.

Dispute Response/Pre-Arbitration

There is only one part to this step, called Response Certification. Issuing banks must read the responses that merchants have sent, and either support what the merchant is saying and accept liability for the amount of the chargeback or counter the response and let Visa decide. Failure to do so within 30 days will result in the issuing bank automatically accepting the liability.

Governance

There is only one part to this step, called Response Certification. Issuing banks must read the responses that merchants have sent, and either support what the merchant is saying and accept liability for the amount of the chargeback or counter the response and let Visa decide. Failure to do so within 30 days will result in the issuing bank automatically accepting the liability.

Rules

Please see our article on Visa’s Reason Codes.

Fraud Rules/Process:

Visa will apply new rules to the dispute process to target both card-present and card-not-present fraud:

American Express is a closed network and so their interchange rates work differently than Visa or MasterCard. For a long time, AmEx was the most expensive credit card to process, although the price has come down in recent years. However, they still have not shed this misconception. This article will attempt to break down AmEx’s system, which is difficult since AmEx does not provide a lot of information on the exact nature of these rates.

What is an Interchange Rate?

Before going into the specifics of American Express Interchange Rates, lets first settle on a definition of what an interchange rate is. An interchange rate is the rate a card network charges to cover the risk of doing business. All credit transactions involve risk because no physical currency is being exchanged, and an interchange rate is calculated to mitigate that risk incurred from fraud as much as possible. The cost of authorization and the average bank cost of funds are also factors in determining the interchange rate. These fees change twice per year and are paid whenever a merchant processes a transaction.

OptBlue

American Express is trying to shed its “expensive” reputation with its OptBlue program. This program offers what is referred to as a “wholesale” pricing agreement to smaller merchants (merchants processing less than $1 million annually). This is a highly personalized program and AmEx does not allow the exact numbers of their OptBlue pricing to be disclosed, although some payment processors list their American Express rates online with their markup. What we do know that AmEx separates transactions into pricing categories, and that certain variables such as the industry (restaurant, retail, ticketing etc.) affect that category. Other factors in determining pricing include whether the transaction is taking place online or over the phone (card-not-present) or in person (card-present) and the average ticket.

OptBlue Rates

Direct Processing

For merchants making over $1 million per year, American Express requires them to sign a direct agreement with the card network. There are two plans that AmEx offers for direct processing: the discount rate plan and a flat-fee plan. The discount rate is structured the same way as the OptBlue plan. AmEx does not provide information on how the flat-fee plan is calculated, however it is known that a merchant that chooses the flat-fee plan pays $7.95 on top of the monthly fee.

Other Fees

Some common fees that merchants may find on their bills include the gateway fee, CNP surcharge (for all keyed or manually entered transactions), Cross-border fee (for international transactions) and voice authorization fee (for when a merchant calls in an authorization).

Is AmEx Right For Your Business?

The last thing a merchant wants to do is lose a sale because they don’t accept AmEx. These days, while AmEx rates may be higher than Visa or MasterCard, it is more important to allow AmEx cardholders to make the purchases that they want to, thus generating more profit for you. After all, if your competitors are taking AmEx, why shouldn’t you?