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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Credit and debit card transactions have a processing fee associated with them that merchants must pay, this is referred to industry terms as credit card processing fees (for more information, click here). As a result, some businesses are reluctant to take credit and debit cards for small purchases. After all, these fees can add up quickly and when merchants see their processing statement at the end of the month, it can sometimes be quite shocking!

This is where cash discount comes in:designed to work for merchants who do lots of small-ticket transactions, cash discount is a program that allows merchants to pass the credit card processing fee to their customers by offering a discount for paying with cash or a check. This is different from a surcharge for credit and debit card users in that the“normal” price of the transaction is the price that credit and debit card users would pay, and customers that use cash or check would receive a discount. A surcharge would mean that the “normal” price of the transaction is what cash or check payments would cost, and those who pay with a debit or credit card would have to pay an extra processing fee.

The best example of Cash Discount is a Gas Station.  Gas Stations post two different prices, one for cash, and one for credit cards.  You can’t get any more straight forward than that.  Merchants using a Point of Sale (POS) software are able to increase prices to reflect the credit card processing fees, then at the time of check out, a discount for cash can apply.  Merchants using a menu would be forced to reprint or change posted menus.

Important: merchants must post the price for cards on the item, thereby making that price the “normal price.” If you post the price for cash and then charge the customer more for using a credit or debit card, that charge becomes a surcharge, which is prohibited by Visa and MasterCard rules, and also by law in several states: Colorado, Connecticut,Florida, Kansas, Maine, Massachusetts, and Oklahoma.

Is Cash Discount Right for Your Business?

That depends on what kind of business you run and how you run it. Do you process a lot of cash transactions vs. credit card transactions? Do you primarily deal with large tickets or small tickets?If you process lots of small-ticket credit card transactions, cash discount maybe right for you as those processing fees can quickly add up and affect your bottom line. However, you must also think that your customers won’t mind the new prices. If you have regular customers that strongly prefer their credit cards, they may choose to frequent somewhere else that does not do cash discount, which would mean that you lose out on the sale completely. Consider who your customers are and how this program will affect your business—if done correctly, you could save hundreds of dollars per year!

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If you accept credit and debit cards, you most likely accept Visa. Being the most popular card worldwide, you would be remiss not to. Visa’s rates are available here to the public, but since they can be somewhat confusing we’ll go over them in this article.

Visa has eight categories for interchange rates: Consumer Check Card, Consumer Prepaid, Consumer Credit, Corporate and Purchasing, Corporate and Purchasing Prepaid, Business, Other, and International.

Visa USA Consumer Check Card

Visa divides their debit interchange program into two categories: Card present and card not present transactions. Then, it further divides cards into “Exempt” and “Regulated” categories from there. The difference between regulated and exempt debit is the amount of money the issuing bank has in assets. If the issuing bank has more than $10 billion in assets, the debit card is considered “regulated,” and if the issuing bank has less than $10 billion on assets, the debit card “unregulated,” or exempt.

The card-present rates are in the table below:

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Card-not-present rates:

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Visa USA Consumer Prepaid

Similar to the consumer check card, the consumer prepaid is also divided into exempt and regulated cards, and card-present and card-not-present transactions. The following table shows the card-present Visa interchange rates for the consumer prepaid card:

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Additionally, the following table shows the card-not-present rates for the Visa consumer prepaid card:

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Visa USA Consumer Credit

Visa’s Consumer Credit program’s interchange rates are dependent upon the industry in which the purchase is being made and the type of Visa card used. For example, a purchase made in a supermarket with the Visa Signature Preferred card would have an interchange rate of 2.10% + $0.10, while if that same supermarket purchase was made with a Traditional Rewards card the rate would be 1.65% + $0.10.

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Visa USA Corporate and Purchasing

The interchange rate for Visa’s Corporate and Purchasing program is dependent on whether the transaction belongs to the Commercial fee program or Government fee program, as shown in the following table:

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Further, there is also an interchange rate that applies to STP, or Straight Through Processing:

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Lastly, the Large Purchase Advantage Fee Program also applies to the Corporate and Purchasing card:

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Visa USA Corporate and Purchasing Prepaid

The Corporate and Purchasing Prepaid interchange rate is subject to five fee programs and whether the card is an exempt corporate prepaid, an exempt purchasing prepaid, or a regulated commercial prepaid:

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Visa USA Business (Excluding Prepaid)

The Business Credit Fee Program interchange rate is dependent on the spending tier, as shown in the table below:

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The Business Debit Fee Program is dependent on whether or not the card is exempt or regulated:

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Visa USA Other Transactions

Visa has interchange rates for transactions categorized as “other,” such as Credit Voucher transactions, Prepaid Loan Service Network, Money Transfer, Cash Disbursement transactions, and Other ATM Non-Cash Disbursement Transactions. These interchange rates are outlined below:

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Visa USA International Transactions

Finally, Visa has interchange rates for international transactions—rates for Visa cards used at a US merchant but issued outside of the US. These rates are dependent upon the type of card, as shown below:

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Mastercard has a special rate for card-not-present/e-commerce transactions. These are riskier transactions because of the risk of fraud, so they have a higher interchange rate. However, you can lower this rate by utilizing Mastercard’s SecureCode feature with the Universal Cardholder Authorization Field (UCAF). Mastercard SecureCode is called such because it requires the cardholder to enter a special code in order to make the purchase, thereby lowering the risk of credit card fraud.

As a result of lowering the risk of fraud, UCAF qualifies for a lower interchange rate than other card-not-present or e-commerce transactions. Further, there are two separate UCAF categories: “Full UCAF” and “Merchant UCAF.” Full UCAF interchange rates apply when both the merchant and the cardholder have SecureCode enabled, and Merchant UCAF interchange rates apply when only the merchant uses SecureCode.

As of April 12, 2019, the interchange rates for full UCAF consumer credit cards (dependent upon what type of card is used) are:

For merchant UCAF, the interchange rates are:

Debit and prepaid cards also have different rates for full UCAF and merchant UCAF. They are:‍

Compare the core credit card merchant UCAF rate to a core credit card key-entered transaction: the merchant UCAF rate is 1.68% + $0.10 while the key-entered transaction is 1.89% + $0.10!

At PayArc, we offer the option to set up your merchant account with MasterCard SecureCode. Not only will this reduce your risk of fraud, it can also save you money in credit card processing fees if you do a lot of card-not-present or ecommerce transactions. Call us today to find out more!

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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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.

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?

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 and the threat of the card network not being paid back by the cardholder as much as possible. Interchange rates are paid whenever a merchant processes a transaction and is usually presented in the form of a percent plus a few cents per transaction. Interchange rates are not regulated by any government entity, so they are set by the card networks themselves.

These interchange rates do change, twice a year in fact, and are generally released in April and October. This is because the payment processing industry is always evolving, and card networks have to keep up with spending trends. The rates don’t always increase, sometimes they decrease or remain the same, depending on several factors the card network considers and their judgement of the market.

The factors that go into the decision to adapt interchange rates include the risk of fraud, the rewards card networks offer cardholders, the cost of the transaction, and the industry in which the purchase is being made (example: a concert ticket is high risk, so it would have a higher rate than, say, a low-risk purchase of a meal at a restaurant). Payment processors add their own markup to cover their own risk of doing business.

Visa and MasterCard’s interchange rates are available to the public, without processor markup, so you can always stay up to date and informed when choosing your payment processor. Visa’s rates can be found here and MasterCard’s are here. To help merchants keep more of the money they earn so their business can grow, PayArc offers one of the best deals in the industry for low-risk businesses, so contact us today to find out if your business qualifies!

It has gained popularity among younger consumers for its low introductory rates, no annual fees and rewards.

Despite its wild popularity, many businesses have chosen not to accept Discover cards because of Discover’s perceived “expensive” rates.

Is Discover really more expensive than card brands like Visa, Mastercard and American Express? Let’s find out…

What Fees Are You Required to Pay to Accept Discover Payments?

Every time a cardholder makes a payment with their Discover credit card, you pay what are known as interchange fees or card brand fees.

The interchange fees or rates are collected by Discover and are typically used to cover the following costs:

Credit and Debit Assessments

These fees can’t be avoided no matter which card issuer you choose. They are applied to gross credit and debit transaction volume and are paid directly to Discover.

International Processing Fee

If a customer makes a purchase using a card originating from outside the US, you will be subject to an international processing fee. You may or may not see the international fee on your statement depending on your pricing model.

Processing Integrity Fee

If a transaction doesn’t go through within a specific period of time, you may be subject to what’s called a processing integrity fee. Typically, the time window is 24 hours for “card present” transactions and 72 hours for “card not present” sales.

Card-Not-Present Surcharge

These are fees you might typically see in e-commerce or mail-order transactions when the card is not physically present. Because these are considered riskier transactions, the fee is slightly higher than “card present” transactions.

Account Status Inquiry Fee

This is a fee that is imposed when you verify cardholder information without actually charging the card.

While these fees may be collected by your processor, they are typically transferred in their entirety to Discover. You can think of these fees as the cost for accepting Discover credit cards in your store.

What Are The Current Interchange Rates for Discover?

Discover sets its interchange rates each year. They may go up or down or remain unchanged.

Here are the current U.S. Discover interchange rates:

* Please note that we have listed the most common interchange rate qualifications. Get in touch with Discover Card Network for a complete list of US interchange rates.

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Is Discover Right For Your Business?

Discover is quickly growing in popularity, especially among younger consumers.

Not sure if accepting Discover cards is right for your business?

Speak to one of our representatives to see how accepting Discover cards in your business may impact your bottom line.

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