Interchange Optimization: Key to Reducing Credit Card Processing Fees

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It’s essential for sellers and service providers to offer customers various payment options. It will accommodate the customer, and their business will boost your income.  That’s a win for everyone. But accepting credit cards has its downside. Credit card processing fees amounting to 2% of each transaction can eat into your profits. The good news is that you can reduce credit card processing fees with interchange optimization.  All you need is the right partner and the right integrated payment processor.

How credit card processing works

When a customer uses a credit card online, in person, or over the phone, the transaction goes through a payment gateway. The payment gateway transmits the payment data to the payment processor. The payment processor communicates with the card issuer for approval, and the credit card company sends payment to the merchant. Each step along the way incurs a fee. There is an authorization fee, a transaction fee, an assessment fee, and an interchange fee. All this adds up to the amount merchants must pay to their payment processor. Fees may vary, but they generally work out to about 2 percent of each transaction. ‎

Interchange fees

Interchange fees are paid to the cardholder’s bank by the merchant’s bank to cover the costs associated with the risk involved in approving payments. The credit card issuer sets and frequently updates Interchange rates.  And there can be hundreds of different levels of interchange depending on the card network.

The level of interchange can be affected by the type of credit card. Debit cards have the lowest risk and the lowest rates. Premium rewards cards have higher rates to offset the bonuses they offer.

The level of interchange can also be affected by the way credit card information was obtained. A card with a chip or accompanied by a signature during an in-person sale represents less risk than a transaction made over the phone, online, or by mail with the card not present.

Sending additional data about the sale may convince the credit card company that a transaction carries a lower level of risk. Less risk translates into lower interchange rates.

Interchange optimization

You can control some of the factors impacting interchange fees. For instance, you can choose the amount and kind of information to attach to each transaction. Interchange optimization is the practice of tweaking the conditions of a transaction to get the lowest interchange rates. The right payment processor makes this an easy task.

The more data you can provide about credit card transactions, the lower the risk assessment and the higher the credit level assigned. The higher the credit level, the lower the processing fees. To achieve a level 3 credit rating, you should be able to provide information such as your industry, shipping details, invoice numbers, and line-item invoice details.‏‏‎ ‎

Because interchange garners the largest portion of a merchant’s processing fees, lowering interchange fees will have the most significant impact on your overall costs.

Integrated payments help with interchange optimization

When your payment processing integrates with your ERP platform ( e.g., NetSuiteMicrosoft Dynamics, or Sage Intacct), interchange optimization can more easily be achieved if using a provider that offers interchange optimization.

Versapay offers a solution that allows you to securely access and transmit the data valuable for achieving higher credit rating levels. Because information such as invoice numbers, items purchased, sales tax requirements, and customer codes is in your ERP system, it can be layered with payment processing and requires no extra effort from your team.

Making credit card payments more accessible to B2B (business-to-business) buyers and B2C (business-to-consumer) buyers has become a priority for merchants needing to remain competitive in what is becoming an increasingly digital marketplace.‏‏‎ ‎

Versapay helps you save on credit card processing costs

Are your customers primarily other businesses (B2B), and do you regularly process high dollar amount payments? Then Versapay with integrated payments and Level 3 data processing will help you save on credit card processing costs.

Before you sign on with Versapay, our team will perform a detailed cost analysis of your latest merchant credit card fee statement. We’ll examine what you are paying now and identify ways to qualify for a better rate.  We’ll break it all down by line item so you can see just where and how you can save.

Versapay can save you up to 40% off your overall cost of acceptance through our unique integration with your ERP. We’ll provide interchange optimization on a transactional level and offer reauthorization management for Level 2 and Level 3 credit processing seamlessly and automatically.

Would you like to know more about how interchange optimization works and what it can do for your organization? Contact our experts at Versapay.

Want to learn more about how interchange optimization works and how we perform detailed costs analyses? Check out our webinar “How Interchange Optimization Achieves Faster ROI,” available on-demand now.

By Versapay.

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