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Visa & Mastercard Raise Credit Card Processing Rates
Visa & MasterCard have raised interchange rates
again effective April 2005, but before we explain the increase lets look at
what comprises a discount rate as these credit card processing rate increases
are not simple.
The discount rate you see on your
merchant statement is based on the Interchange rate.Interchange is the rate
Visa & MasterCard member issuing banks charge on credit card transactions.
Similarly to how your mortgage is based on prime. Issuing banks are the banks
that issue credit cards to cardholders. Contrary to popular belief, 80% of
discount rate is paid to bank that issued credit card to customers patronizing
your business.
Interchange compensates
card issuing institutions for their risk and the expenses they incur to
process transactions.
The fee amount is based on the level of risk associated with funding a
transaction, in hopes of encouraging small businesses to follow procedures
that reduce fraud.
The interchange fee is determined by the nature of your business and the
processing procedures you follow. Visa and MasterCard set these rates by
assessing the level of risk associated with funding and expenses involved in
processing a transaction
.
Every time Visa & MasterCard raise
the interchange rates your credit
card processor must decide to either absorb those increases or pass them on to
you the merchant. Visa & MasterCard regulations stipulate that a merchant must
be notified in writing of any rate increase and usually receives notice at
least 30 days prior.
You should see this notice in your March, April & May credit card
processing statements.
This year Visa & MasterCard raised rates about 10 basis points(for
detailed increases see chart below). If you were paying 1.75% as of April 1st
2005 you will now be paying 1.85%. This amounts to a $1.00 increase per
$1,000.00 of Visa MasterCard transactions to process through your terminal.
This may vary slightly depending on how much your bank or processor has
absorbed the increase.
see www.accpconline.com rates
ACCPC Online is only raising 7 basis points we are absorbing 3
basis points. These rates go into effect 1 April 05 so if you feel this
increase will effect you significantly please
contact us for a new rate comparison. You may have a small fee to cancel
your current contract but the savings of the lower cost of credit card
processing may offset this.
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