When businesses review their credit card processing fees, most focus on the rate negotiated with their payment processor. For decades, merchants have been conditioned to believe that lowering their processor’s rate is the best way to reduce costs.
However, there’s a much bigger part of the equation that often gets overlooked.
For many businesses, particularly those accepting commercial, corporate, and purchasing cards, the majority of their credit card processing fees come from interchange and network fees rather than the processor’s markup.
While negotiating a lower processing rate can certainly save money, it doesn’t necessarily mean your transactions are qualifying at the lowest interchange rates available.
And that distinction can have a significant impact on your bottom line.
What Makes Up Your Credit Card Processing Fees?
Credit card processing fees generally consist of three components:
- Interchange fees: Fees established by card networks such as Visa and Mastercard and generally paid to the card-issuing bank.
- Card network fees: Additional assessments and transaction-related fees charged by the card networks.
- Processor fees: The markup charged by your payment processor for its services.
Depending on your business and the types of cards you accept, interchange and network fees can account for the vast majority of your total processing costs, sometimes approaching 90%.
Yet most traditional processing reviews focus primarily on the processor’s markup.
For example, a salesperson might offer to lower your processing rate by 10 basis points. That’s a savings of 0.10%, which certainly adds up over time.
However, what happens if some of your transactions are unnecessarily qualifying at interchange rates that are 50, 75, or even 100 basis points higher than they should?
Those additional costs can far exceed the savings from negotiating a lower processor rate.
Why Lower Processor Rates Don’t Always Mean Lower Costs
Here’s something many businesses don’t realize.
Two companies can have the exact same processor pricing yet pay significantly different credit card processing fees.
Why?
Because interchange costs depend on several factors, including the type of card accepted, how the transaction is processed, the information submitted, and whether the transaction meets the card network’s qualification requirements.
For example, one company might process a commercial purchasing card transaction and qualify for an available optimized interchange rate.
Another company could accept a similar card but fail to meet certain processing or data requirements, causing the transaction to qualify at a higher rate.
Both companies could have identical processor markups.
Yet their overall processing costs could be very different.
The difference isn’t necessarily what their processor charges. It’s how their transactions qualify at the interchange level.
How to Read Your Credit Card Processing Statement
You don’t have to become an interchange expert to better understand your credit card processing fees.
However, knowing what to look for on your merchant statement can help you identify potential problems.
Start by reviewing your total processing volume, total fees, effective processing rate, and the interchange categories assigned to your transactions.
Your effective rate is calculated by dividing your total processing fees by your total credit card processing volume.
For example, if your business processes $500,000 in credit card payments and pays $15,000 in total fees, your effective processing rate is 3%.
That number provides a useful starting point.
However, your effective rate alone doesn’t tell you whether your transactions are qualifying correctly.
To understand that, you need to look deeper into the interchange portion of your statement.
If your statement doesn’t provide an interchange breakdown, ask your processor whether a more detailed report is available.
Hidden Interchange Downgrades That Increase Processing Fees
One of the most commonly overlooked areas of credit card processing fees is interchange downgrades.
An interchange downgrade occurs when a transaction fails to qualify for an otherwise available, more favorable interchange category.
This can happen for several reasons, including missing transaction information, processing errors, or failure to meet specific card network requirements.
Some of these problems may be preventable.
Standard, EIRF, and Other Costly Interchange Downgrades
One of the most important things to look for when reviewing your credit card processing statement is transactions qualifying under Standard or EIRF (Electronic Interchange Reimbursement Fee) interchange categories, along with other costly downgrades.
These higher-cost classifications can indicate that transactions failed to meet the requirements for more favorable interchange rates.
For example, a transaction may have been authorized and settled successfully, but missing information, incorrect processing procedures, or other qualification issues can cause it to clear at a significantly higher interchange rate.
Here’s what many businesses don’t realize: Just because a transaction was charged at a published Visa or Mastercard interchange rate doesn’t mean it qualified at the lowest rate available.
The rate itself may be legitimate, but the way the transaction was processed could have caused it to qualify at a higher rate than necessary.
For businesses processing significant credit card volume, identifying and correcting these unnecessary downgrades can make a substantial difference in overall processing costs.
Missing or Incorrect Transaction Data
Certain commercial card programs require specific transaction information to qualify for optimized interchange rates.
Depending on the program, this may include invoice details, tax information, product data, or other required transaction fields.
When information is missing, incomplete, or incorrectly submitted, the transaction may not qualify for the intended rate.
Processing and Settlement Issues
Transaction processing methods can also influence interchange qualification.
Authorization procedures, settlement timing, and other processing requirements may affect the rate assigned to a transaction.
A transaction that appears to have been processed successfully can still qualify at a higher interchange rate than expected.
That’s why simply seeing an interchange charge on your statement doesn’t automatically mean the transaction qualified at the correct rate.
Why B2B Credit Card Processing Fees Deserve Special Attention
Businesses that accept commercial, corporate, and purchasing cards have additional reasons to review their credit card processing fees.
Unlike many consumer credit card transactions, Visa and MasterCard both have special interchange rates for commercial cards when applicable requirements are met.
These programs can provide meaningful opportunities to reduce acceptance costs.
For example, eligible commercial transactions may benefit from enhanced transaction data and qualification programs.
Large-ticket transactions may also qualify for specialized pricing when they meet the applicable card network requirements.
However, these opportunities depend on the card, transaction, processing environment, and current program rules.
Simply accepting a commercial card doesn’t guarantee that the transaction will receive an optimized interchange rate.
This is particularly important for manufacturers, wholesalers, industrial distributors, and other businesses processing significant B2B payment volume.
For additional information, see our page on Level 3 credit card processing.
How Much Could Unnecessary Processing Fees Be Costing Your Business?
Consider a business processing $2 million per month in credit card payments.
If $1 million of that volume is unnecessarily qualifying at interchange rates averaging 50 basis points higher than an available rate, the additional cost would be:
- Monthly unnecessary fees: $5,000
- Annual unnecessary fees: $60,000
That’s $60,000 annually without any change to the processor’s negotiated markup.
This is a hypothetical example, and actual savings depend on transaction mix, eligibility, and the specific qualification issues identified.
Nevertheless, it illustrates why looking beyond the processor’s rate is so important.
Can You Reduce Credit Card Processing Fees Without Switching Processors?
Absolutely. In some cases, businesses can reduce their credit card processing fees without negotiating new processor pricing or changing payment providers.
At Revolution Payments, we’ve seen firsthand how correcting interchange qualification issues can make a substantial difference.
For example, we’ve helped one client reduce their payment acceptance costs by more than $50,000 per month, and another by more than $150,000 per month.
Now, you might be wondering how much credit card volume these businesses are processing. These are very high-volume merchants, so naturally, the dollar amounts are significant.
But the savings amount really isn’t the point.
What’s particularly interesting is that we didn’t lower the processor’s rate they were paying. The savings came from correcting and optimizing how transactions were qualifying at the interchange level.
The point is that two companies can have the exact same processor pricing yet very different payment acceptance costs based solely on how their transactions are qualifying.
And that’s something businesses of all sizes should understand when reviewing their credit card processing fees.
These are individual client examples, not typical or guaranteed results. Actual savings depend on each merchant’s transaction mix and processing environment.
What Should You Look for on Your Processing Statement?
When reviewing your credit card processing fees, consider asking the following questions:
- Are any transactions qualifying under expensive Standard interchange categories?
- Are commercial and purchasing cards receiving the appropriate interchange treatment?
- Are eligible large-ticket transactions qualifying for available programs?
- Is required transaction data being submitted correctly?
- Are processing or settlement issues causing unnecessary downgrades?
- Have recent card network changes affected how your transactions qualify?
- Has anyone independently reviewed the interchange portion of your processing statement?
You don’t need to know every interchange category or understand every card network rule.
However, recognizing that these issues exist is an important first step.
The Bottom Line: Look Beyond Your Processor’s Rate
Lowering your processor’s markup can certainly help reduce credit card processing fees.
But focusing exclusively on that rate can leave a much larger opportunity unexplored.
Interchange rates are established by the card networks. However, how individual transactions qualify for those rates can depend on factors that deserve closer examination.
For B2B businesses accepting commercial, corporate, and purchasing cards, understanding those differences can be especially valuable.
Just because a fee appears under interchange doesn’t necessarily mean the transaction qualified at the lowest applicable rate.
And just because you’ve negotiated competitive processor pricing doesn’t mean you’re paying the lowest processing costs available.
Request a No-Obligation Interchange Audit
Request a No-Obligation Interchange Audit
At Revolution Payments, we specialize in helping B2B businesses identify unnecessary interchange downgrades, qualification issues, and processing inefficiencies that may be increasing their credit card processing fees.
This is a different type of review than what you might be accustomed to. Most traditional credit card processing reviews focus on the processor’s rates and fees. Our approach goes much deeper, examining how your transactions are actually qualifying at the interchange level.
During our no-obligation interchange audit, we’ll review your processing statements and show you which transactions are qualifying correctly, which ones may be costing you more than they should, and why.
We’ll also explain what’s causing those higher costs and identify opportunities to improve how your transactions qualify.
You don’t have to become an interchange expert. We’ll show you exactly what we’re finding and where potential savings may exist.
Contact Revolution Payments today to request your no-obligation interchange audit and find out whether your business is paying more than necessary to accept credit cards.Call 888 790 3450 or email info@ revolution-payments.com