Death, Taxes, and Interchange Rates: Understanding The Role They Play In Your Small Business

November 10, 2015

“In this world nothing can be said to be certain, except death and taxes” (Benjamin Franklin).

Franklin certainly knew a lot about taxes and death. If you’re in the retail or service industry, there’s another unavoidable body that tries to consume you.

Interchange Fees

Retail and service merchants tend to have face to face transaction, and with ease of credit cards not accepting them at your small business can cost you profits. So if you’re losing money from not taking credit cards, it’s time to look into getting a payment processor.

One of the basic costs of accepting credit cards is known as interchange rates. Interchange rates are vital to understand when signing up for a payment processor.

What are they?

Interchange rates are charged by credit card companies for every transaction you process for a card swiped at your business (or key entered, or online, although those are a separate topic). It’s a fee they apply for you processing the payment between the two banks involved in the transaction (your own bank and the cardholder’s bank).

Can you avoid these fees?

Sadly, no.

Biting the bitter pill of interchange rates are unavoidable unless you want to lose out on all the money made by accepting credit payments.

There is some good news

You can control how expensive the fees are to a certain extent. Many Gateways and processors offer lower rates then you would get from setting up a merchant account through a bank. The below links show the table of charges of interchange rates.

Banks and processors both have an amount added to the interchange rates, as a service fee, and since you have to have a Gateway merchant account to process credit card payments these fees are unavoidable as well.

What do you do then?

Well, despite what you may think, it’s often cheaper to go with a third party processor then have your bank provide the service for you. The rate and fees are usually cheaper by 1%, sometimes more, depending on the provider. However, beware of processors who charge more for smaller businesses by adding a higher rate, unfairly charging more in fees.

Alright, now that you’ve had all this information dropped on you, let us leave you with some encouraging advice.

Research processors and find the best for your business. Not all processors are created equal, so do your research in the fee rates and the percentage on each transaction.

Also, don’t feel defeated over the costs of accepting credit card payments. It may seem like a loss, but like many situations, you have to invest money to earn money.

Want to learn how to save on interchange rates?

Take a look at our services of past projects, and see what others have said about our service.

If you’d like to learn more about what steps to take with your own business, or would like a free consultation,  contact us here .