Twice a year, your cost changes and nobody called you.
Interchange is set by the card networks and republished twice a year, in April and October. Every processor passes it through, nobody announces it, and a bill that moves in those months usually has this behind it rather than anything your processor did.
What this page settles.
Three questions, in the order most people ask them.
What actually happens
Interchange is the portion of your processing cost that goes to the bank that issued your customer’s card. It is set by the card networks — Visa, Mastercard, Discover and Amex each publish their own schedules — and it is the largest component of what you pay, typically 70% to 80% of the total. What is interchange.
Those schedules are republished twice a year, conventionally in April and October. A republication can change the rate on an existing category, add a new category, retire one, or redefine which transactions fall into which.
The consequence for you is mechanical. Your cost per transaction is determined by which category each transaction lands in and what that category costs. Change the second thing and your cost changes, without anything at all changing in your business.
Every processor passes this through. There is no version of this where somebody absorbs it — interchange is a cost paid to a third party, and nobody in the chain between you and the issuing bank has the ability to discount it.
Why nobody tells you
Three reasons, and only the last is uncharitable.
It is not one change. A republication is a schedule covering hundreds of categories. Whether it affects you depends on your card mix, your merchant category code and how your transactions qualify. A processor cannot send a meaningful individual notice without doing per-merchant analysis.
Your agreement already permits it. Essentially every merchant agreement contains a clause allowing fee changes on notice, and pass-through of third-party cost increases is the least controversial use of it. Notice is frequently given as a line on your statement rather than a separate communication. Agreement red flags.
And a change nobody announces is a change nobody questions. Which is the part worth being alert to, because it means an increase that was not interchange can hide comfortably in a month when an interchange change was expected.
How it shows up on your bill
On interchange-plus, it is visible. Interchange is itemised by category, so you can compare the same categories across two months and see exactly what moved. Your markup is unchanged, because the markup is a separate number. This is the main practical argument for interchange-plus: not that it is always cheaper, but that this particular event is legible. Interchange-plus pricing.
On tiered pricing, it is invisible. Your qualified, mid-qualified and non-qualified rates may or may not move, at your processor’s discretion, and nothing on the statement tells you whether a change reflected interchange or margin. Non-qualified surcharges.
On a flat rate, it is invisible and, in the short term, absorbed. Square charging 2.6% + 15¢ keeps charging 2.6% + 15¢ through an April update. That protection is part of what the flat-rate margin pays for, and flat-rate providers do revise their published rates over time. Flat rate versus interchange-plus.
On blended or billback, invisible, and with billback the effect may appear a month later than you expect. Enhanced billback.
What it is not
Worth separating, because “it must have been the April update” is also a convenient explanation for things that were not.
It is not your processor raising its margin. That is a separate event, permitted by a separate clause, and it can happen in the same month.
It is not a change in your card mix. If more of your customers used premium rewards cards this month, your cost rose without any schedule changing. That is the most common cause of an unexplained increase and it has nothing to do with April or October. What rewards cards cost.
It is not downgrades. Transactions failing to qualify is a procedural problem, it can appear suddenly, and it is fixable. Card-not-present downgrades.
It is not a new fixed fee. A PCI fee, a new monthly charge or an annual fee landing in April is not interchange, whatever the timing suggests.
The full list of reasons a bill moves.
What you can actually do
You cannot negotiate interchange. You can change which schedule your transactions land on, which is a different lever and a real one.
Read cards the cheap way. Chip or contactless rather than keyed, every time it is possible. A keyed in-person transaction is a card-not-present transaction for pricing. Card-not-present downgrades.
Settle the same day. Late settlement pushes transactions outside the authorization window and down a tier. The most common self-inflicted cost in this business. Batch cutoff times.
Send the extra data on commercial cards. Level 2 fields can reduce commercial interchange by half a point or more, and most merchants have never been told the fields exist. Level 2 and Level 3 data.
Check your MCC is right. It decides which schedules apply to you at all, it was set at underwriting, and you were probably never shown it. MCC codes.
Interchange optimisation, in full.
Checking whether it was really interchange
Four steps, and worth doing in May and November specifically.
Compare effective rates, not totals. Total fees divided by total volume, this month against two months ago. A total that rose because volume rose is not a price change. What is an effective rate.
If you are on interchange-plus, compare the markup line. It should be identical. If the markup moved, that was not interchange.
Compare the same interchange categories across both months. This is where you see the actual change, category by category.
Check for anything new. A fee that did not exist before is not an interchange update, whatever month it arrived in.
If you cannot do steps two and three because your statement does not itemise interchange, that is itself the finding, and it is an argument for a pricing model where you can.
What we charge
Interchange + 0.50% + 10¢ in person, interchange + 0.75% + 25¢ keyed, with no contract, no monthly fee and no monthly minimum.
We pass interchange through at cost, which means you will see April and October on your statement. That is the point: a change you can see is a change you can check, and our markup staying put while interchange moves is the thing you can verify for yourself.
While we are on the subject
Can I avoid interchange increases?
No. Interchange is set by the card networks and paid to the issuing banks, and no processor can discount it. What you can change is how your transactions qualify.
Will my processor tell me when interchange changes?
Usually not individually. Most publish schedules, and your agreement almost certainly permits pass-through changes with limited notice.
Does it always go up?
No. Individual categories move both ways, and categories are added and retired. The net effect on a given merchant depends entirely on their card mix.
Why did my bill move if I am on a flat rate?
A flat rate protects you from interchange changes in the short term, which is part of what the margin pays for. Flat-rate providers do adjust their published rates over time.