Optimizing Interchange:  A Painless Way to Cut Costs

August 13, 2020
Average Read Time: 2 minutes

As businesses face unprecedented profitability challenges, it’s critically important to identify every possible opportunity to cut costs. Looking at credit card processing spend is natural, but many companies are unaware of the opportunity to reduce what they’ve been paying in B2B transaction interchange costs.

What Is Interchange?

Interchange fees are transaction fees that Visa, Mastercard, and other card brands charge to cover handling costs, fraud and bad debt costs, and the risk involved in approving payments. Interchange varies widely among the card brands, card types, and how cards are processed. Business, corporate, and purchasing and fleet cards are assessed some of the highest interchange fees. This is especially significant as interchange makes up nearly 90 percent of transaction processing cost.

Different Interchange Levels

The good news is that companies can considerably lower Visa and Mastercard interchange fees by providing more data with each B2B card transaction. The more data provided, the more savings you can realize:

Basic retail transactions include Level I data such as:

  • Account number
  • Authorized amount
  • Expiration date
  • Card verification value
  • Zip code
  • Merchant category code

Transactions adding Level II data qualify for interchange savings over Level I interchange rates. The additional Level II data includes:

  • Sales tax amount
  • Sales tax indicator
  • Customer code

Transactions providing Level III data qualify for even greater savings by including fields like:

  • Destination country code
  • Shipping charges
  • Discount details
  • Order data
  • VAT number
  • Line item information, such as commodity/product code, unit cost, quantity sold, item description, VAT amount, etc.

The amount of savings varies based on payment processing pricing structure and other factors, but typically companies can realize three to fifteen percent savings on interchange and more, just by providing additional data with transactions. That’s a big deal, especially for organizations with lots of B2B or high dollar credit card transactions. The savings can really add up.

To ensure your business doesn’t end up paying more interchange than it should, talk with your payment processor. They will be able to tell you how many payments you’ve been taking that could qualify for Level II or Level III rates, help you calculate potential savings, and then get you set up quickly to rack up interchange savings.

With the MerchantE Interchange Optimization Program, you can be sure you’re providing the required transaction details to the card brands to save more on qualified transactions.

The Bottom Line: Don’t leave money on the table. Submitting additional data to reduce interchange can have a significant financial impact for companies regularly accepting large numbers of B2B or high dollar credit card payment transactions.

Learn more about MerchantE's Interchange Optimization Program

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