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Is it Possible to Reduce Credit Card Interchange Fees?

Sarah Janssen

Account Lead

Let’s face it. Nobody wants to pay high fees

This is our guide for Canadian small and medium-sized businesses, focusing on the topic of reducing credit card interchange fees. Understanding these fees is vital for maintaining your profitability and competitive edge.

Rescue Payments steps in as your partner in this area. We specialize in reducing these fees through interchange optimization, ensuring you receive cost-effective rates.

For small and medium-sized businesses, controlling costs is critical. High interchange rates can inflate your credit card processing costs, impacting your bottom line. By lowering these rates, you can enhance profitability and stay competitive.

TL;DR: Rescue’s expertise in interchange optimization provides businesses with cost-effective rates, directly enhancing their bottom line. Interchange fees, charged during each card transaction, vary based on card type, transaction mode, and merchant category. Understanding and properly managing these fees is essential for SMEs to maintain competitiveness and profitability. Big losses can come from improper transaction or merchant category classifications. We implement compliant surcharge programs, allowing businesses to pass credit card fees to customers responsibly, maintaining transparency and regulatory adherence.  Rescue Payments’ approach not only helps in navigating the complexities of credit card fees but also equips businesses with strategies to mitigate higher processing costs, particularly in e-commerce, ensuring a balance between customer convenience and cost-effectiveness.

Understanding Credit Card Interchange Fees

What exactly happens financially each time a customer swipes, taps, or enters their card details online? A significant part of this transaction involves something that is known as interchange.

What Are Interchange Fees?

Interchange fees are transaction fees that a merchant’s bank pays to the cardholder’s bank as part of each credit or debit card payment process. These fees compensate the cardholder’s bank for the part it plays in handling a card transaction, including risks like fraud and bad debt or if a transaction is less risky.

How Are Interchange Fees Set?

The setting of interchange fees is a complex process. They are determined by credit card networks, like Visa, Mastercard and American Express, and vary based on several factors:

Type of Card Used: Different card types (like standard, premium, or corporate cards) issued by various card brands and banks have different fee structures.

Transaction Type: In-person (card-present) transactions often have lower fees compared to online (card-not-present) transactions, due to different risk levels.

Merchant Category: Different industries are charged different fees. For instance, a grocery store might have a different rate compared to a restaurant.

Key Factors Influencing Interchange Fees and Processing Fees

A deeper understanding of the factors influencing interchange fees can lead to more effective cost management in payment processing. Let’s expand on these factors relating to the actual interchange fee and the fee per transaction with additional examples across various merchant categories.

Card Type: Debit Cards, Credit Cards and Premium Cards

Different types of cards have varying interchange fees due to their inherent risk and benefits:

Credit Cards: Typically have higher fees, especially for cards with extensive rewards programs.

Debit Cards: Attract lower fees due to direct account withdrawals, presenting less risk.

Premium Cards: These often come with higher interchange fees due to the additional rewards or benefits they offer to cardholders.

Merchant Categories

Interchange fees vary significantly across different industries:

  • Retail: Often has lower fees due to higher transaction volumes and lower risks. For example, a clothing store.
  • Services: Higher fees are common due to different transaction patterns. This includes businesses like law firms or consulting agencies.
  • Hospitality: Restaurants and hotels might face specific fee structures due to the nature of their transactions, which could include higher ticket sizes or additional charges like tips.
  • Healthcare: Medical practices and pharmacies may have different interchange rates, reflecting the unique transactional nature of healthcare services.
  • E-commerce: Online businesses typically experience higher fees for card-not-present transactions than other merchants pay.
  • Entertainment and Leisure: This category, including cinemas and leisure parks, may have different rates due to varying transaction sizes and frequencies.

Credit Card Transaction Processing Types

Card-Present Transactions

Card-present transactions occur when a customer physically uses their card at your point-of-sale (POS) system. This includes swiping, dipping (for chip cards), or tapping (for contactless payments). Here’s why debit cards typically have lower credit card interchange fees:

Reduced Fraud Risk: The physical presence of the card during the transaction significantly lowers the risk of fraudulent activities. This reduced risk is reflected in lower interchange fees.

Secure Transaction Verification: Technologies like EMV chips and PIN verification add extra layers of security, further decreasing the likelihood of fraud.

Faster Processing: Physical transactions are generally processed more quickly and efficiently, contributing to the lower fee structure.

Card-Not-Present Transactions

Card-not-present transactions include those made online or over the phone, where the physical card isn’t used. These transactions tend to attract higher interchange fees due to:

Increased Fraud Risks: The absence of the card and cardholder during the transaction elevates the potential for fraud. This higher risk is compensated for by higher interchange fees from credit card companies.

Verification Challenges: Verifying the cardholder’s identity is more challenging in these transactions, adding to the risk.

Growing E-commerce TrendsWith the rise of online shopping, businesses are dealing with an increasing volume of transactions, thus it becomes crucial to understand the actual interchange fee and fee per transaction.

Strategies to Mitigate Higher Credit Card Processing Fees

While card-not-present transactions are essential, especially for e-commerce businesses, there are strategies to mitigate the higher fees:

  • Implement Advanced Security Features: Using tools like Address Verification Services (AVS) and Card Verification Value (CVV) checks can help reduce the risk of fraud in online transactions.
  • Educate Customers on Secure Online Practices: Encouraging customers to use secure internet connections and regularly update their payment details can minimize risks.
  • Regularly Update E-commerce Platforms: Keeping your online transaction systems up-to-date with the latest security protocols can help in qualifying for lower interchange fees.

The type of transaction processing you use has a direct bearing on the interchange fees you’re charged. By understanding these differences and implementing effective strategies, SMEs can better manage these costs, enhancing their overall financial health.

The Impact of Interchange Fees on SMEs

Interchange fees, a fraction of each credit card transaction, might seem insignificant at first glance. However, the fee per transaction can accumulate, especially for businesses with a high volume of card transactions. Understanding these structures is essential to maintain healthy profit margins and learning how to qualify for the lowest interchange fees.

Top Five Impacts on Small Businesses

  1. Reduced Profit Margins: Every credit card transaction chips away at profits due to the percentage-based interchange fee.
  2. Competitive Disadvantage: Higher fees for SMEs compared to larger businesses can create an uneven playing field.
  3. Operational Challenges: Balancing the cost of accepting card payments with customer convenience.
  4. Pricing Strategies: Need to adjust pricing to account for interchange fees, affecting overall competitiveness.
  5. Cash Flow Concerns: High fees can strain cash flow, particularly for businesses with tighter margins.

As an SME, it’s vital to grasp these impacts and explore strategies for reducing interchange fees and lowering these costs. The next section will delve into the factors influencing these fees and how they can be optimized for your benefit.

Strategies for Interchange Optimization

Fees, set by card networks like Visa and Mastercard, can significantly impact your bottom line. Let’s explore effective strategies to reduce interchange fees and learn what is best practice.

Choose the Right Interchange Program

  • Tailored Programs: Look for interchange programs that cater to your specific merchant category and type of card transactions. Different programs offer varying interchange rates
  • Expert Assistance: Engage a payment processor like Rescue Payments to help you navigate credit card networks and select a program that offers the lowest interchange rates.

Optimize Payment Processing Methods

  • Encourage Card-Present Transactions: These transactions often have a lower interchange rate than card-not-present transactions. Use efficient POS systems to encourage more in-person card payments.
  • Secure Online Transactions: For online shopping, implement security measures like SSL certificates to qualify for lower interchange fees on card-not-present sales.

Educate and Train Your Staff

  • Proper Processing Techniques: Ensure your team is adept at processing both credit and debit card transactions correctly, as errors can lead to a higher level of interchange fees.
  • Fraud Prevention: Training in fraud detection can lower the risk profile of your transactions with credit card companies, potentially leading to reduced credit card processing fees.

Regularly Review and Negotiate Rates

  • Stay Updated: Keep abreast of changes in interchange fees by credit card networks and evaluate your processing card payments method regularly.
  • Negotiate with Providers: Approach your payment processor to discuss potential lower interchange fees, especially if you process a high volume of credit card transactions.Leverage Technology and Data
  • Analyze Transaction Data: Regular analysis can help identify patterns that qualify for lower interchange rates, such as the type of card used or the proportion of debit vs. credit transactions.
  • Upgrade Technology: Utilize advanced payment gateways and payment methods to ensure every transaction is processed with maximum security, qualifying for lower fees.
  • Use digital commerce for transactions to prevent issues that come with keying in manually, which can lead to higher rates. This will typically result in a lower interchange rate.

How Rescue Payments Assists in Reducing Credit Card Fees

Rescue Payments is specialized in helping firms reduce fees. We help businesses easily transition their payment systems to a fully-compliant surcharge program for credit and debit card acceptance. Here is how we do it.

Implementing Compliant Surcharge Programs

Surcharge programs are a strategic way to offset the burden of credit card fees and payment fees:

Compliant Surcharge Implementation: We help businesses seamlessly integrate a surcharge program, allowing them to accept credit card payments without absorbing high costs. This method aligns with the need to maintain lower interchange rates.

Balancing Costs with Customer Convenience: The surcharge program is designed to ensure customers can use their preferred payment methods, while businesses avoid hefty credit card fees typically levied by the card issuer.

Customized Solutions

Tailored Surcharge Strategies: Rescue Payments provides customized surcharge solutions based on your specific business model and customer transaction patterns, aiming to effectively reduce interchange rates.

Advanced Technology and Support: With our sophisticated payment processing tools, we ensure the surcharge program is integrated smoothly, maintaining a positive transaction experience for both merchants and customers.

Ensuring Compliance and Transparency

Regulatory Adherence: We navigate the complexities of regulations to ensure your surcharge program complies with all legal requirements, thus avoiding any unintended payment fees or penalties.

Clear Customer Communication: Transparency is key. We assist in implementing strategies to inform customers about the surcharge, maintaining their trust and preventing surprises at the point of sale.

Rescue Payments empowers SMEs to manage credit card fees more effectively, allowing them to continue offering the convenience of credit and debit card payments without the financial strain of high interchange fees. Through our surcharge program and customized assistance, businesses can achieve a balance between cost management and customer satisfaction.


When it comes to credit card interchange fees, payment processing fees, and related costs, SMEs often have a myriad of questions. Here, we address these common queries, providing insights into how these fees work, their structure, and the role of various entities in the payment processing ecosystem.

What are Credit Card Interchange Fees?

Interchange Fees Explained: These are fees that a merchant’s bank pays to the cardholder’s bank as part of a credit card transaction. They are a significant part of credit card fees and vary based on factors like the type of card used, transaction type, and merchant category.

How are Interchange Fees Set?

Setting the Fees: Interchange fees are set by credit card networks like Visa and Mastercard. They consider several factors, including the type of card (e.g., standard, debit card, premium card), the risk involved in approving the transaction, and whether it’s a card-present or card-not-present transaction.

What Role Does the Merchant’s Bank Play?

Merchant Bank’s Responsibilities: The merchant’s bank, also known as the acquiring bank, facilitates credit card payment processing. It plays a crucial role in managing payment fees and negotiating interchange rates with the card networks and card issuers.

Are There Hidden Fees in Payment Processing?

Understanding Hidden Fees: Besides the apparent processing fee, there may be other charges not immediately visible. These can include monthly account fees, terminal rental fees, or PCI compliance fees. It’s crucial for merchants to thoroughly review their contracts and statements for such hidden fees.

Can Interchange Fees Be Reduced?

Reducing Interchange Fees: Yes, strategies like selecting an appropriate payment processing plan, encouraging debit card usage over credit cards, and using advanced fraud prevention tools can help lower interchange rates. Implementing a surcharge program, as offered by Rescue Payments, is another effective method to offset these fees.

How Often Do Interchange Rates Change?

Rate Changes: Interchange rates can change twice a year. In light of continuous changes in the level of interchange fees, it’s important for merchants to stay informed and adjust their payment strategies accordingly to avoid higher rates.

What is Level 3 Data and How Does it Affect Fees?

Impact of Level 3 Data: Level 3 processing involves providing detailed transaction data, which is particularly relevant for B2B transactions. Providing this data can help qualify for the lowest interchange rates, as it reduces risk and provides more transparency in transactions.

How Do Rewards Cards Affect Interchange Fees?

Rewards Cards and Fees: Typically, transactions involving rewards cards have higher interchange rates to cover the costs of rewards offered to cardholders. As a merchant, transactions with these cards might slightly increase your processing costs.

By understanding these aspects of interchange and processing fees, SMEs can better navigate the complexities of accepting card payments, ensuring they are making informed decisions that positively impact their bottom line.

Want advice on setting up a surcharge program?

We host weekly live trainings teaching you how to get the most out of your surcharge program, and if you want to get learning right now, you can download our Surcharge Canada Guide.

Download the Surcharge Canada Guide
Surcharge Canada Guide