Who pays for the points, and why it is partly you.
A premium rewards card costs more to accept than a basic debit card, and the gap is wide. It is the single largest driver of why two identical businesses can have different effective rates, and it is entirely outside your control.
What this page settles.
Three questions, in the order most people ask them.
Where the points come from
A customer with a card paying two percent cashback is being paid two percent by somebody. Card issuers do not fund rewards out of goodwill; they fund them largely out of interchange — the fee the issuing bank receives every time that card is used.
Which means the economics run like this. A bank wants cardholders. Cardholders want rewards. Rewards are funded from interchange. Interchange is paid by merchants. So richer rewards sit on cards with higher interchange, and the merchant accepting them pays for the points their customer is earning.
That is not a scandal and it is not hidden — the tables are published. But it is rarely explained to a merchant wondering why their effective rate is higher than the shop down the road’s.
The ladder, roughly
Published interchange runs across many categories, but the shape is consistent:
Regulated debit is the cheapest thing you can accept, by a distance. Debit issued by larger banks is capped by regulation rather than set commercially.
Unregulated debit and basic credit come next.
Standard rewards credit above that.
Premium and signature rewards cards above that again — the ones with lounge access, travel insurance and high cashback.
Commercial, corporate and purchasing cards are generally the most expensive, which is why selling B2B changes the arithmetic.
We are not printing specific percentages here, because the tables are revised and a figure typed on this page would be wrong within a year. Visa and Mastercard publish current US schedules on their own sites, and your own itemized statement is the authoritative answer for what you actually paid.
Why this explains your rate better than anything else
Two businesses with identical pricing, identical volume and identical providers can have noticeably different effective rates. The difference is who walks through the door.
A business serving affluent customers in a city centre sees more premium rewards cards. A business serving a neighbourhood with a lot of debit use sees fewer. Neither has negotiated better or worse. They have different customers.
This also explains the thing merchants most often phone about: the bill moved and nobody changed the pricing. A month with more rewards cards, more business cards or more phone orders costs more. Eight causes, in order of likelihood.
The useful consequence: your effective rate is not a judgement on your provider. The markup is. Those are two different numbers and almost every sales conversation in this industry depends on conflating them.
What you can actually do
Honestly, very little about the cards themselves — and that is worth saying so you stop looking for a lever that does not exist.
You cannot pick which cards to accept by reward level. Accepting a brand generally means accepting its cards.
You should not want to. A customer paying with a premium card is frequently a customer spending more. Declining the expensive cards would be declining revenue to save a fraction of it.
What you can do is make sure you are not paying twice for the same card mix:
Get onto pricing where the mix is visible. On interchange-plus an expensive card costs you what it costs, plus a stated markup. On tiered pricing it arrives as a non-qualified surcharge that may or may not correspond to what actually happened.
Fix the things that are yours. Address data, settlement timing and transaction types genuinely move transactions between categories, and they are free.
Compare on markup, not on effective rate. Your effective rate is partly your customers. The markup is entirely your provider. The worksheet.
And if the cost is genuinely material to your margins, that is the real argument for considering a surcharge or cash discount programme — not the pitch, but the arithmetic.
What we charge
Interchange + 0.50% + 10¢ in person, interchange + 0.75% + 25¢ keyed. Interchange passes through at cost, so an expensive card costs you exactly what it costs and no more, and our margin is the same on a premium rewards card as on a debit tap.
Send us a statement and we will break your volume down by card type, so you can see how much of your rate is your customers and how much is your provider.
While we are on the subject
Can I refuse premium rewards cards?
Card network rules generally require that if you accept a brand’s credit cards you accept all of them. Picking and choosing by reward level is not available to you, and would be a poor idea commercially in any case.
Can I surcharge only the expensive cards?
Surcharging rules cap a surcharge at your cost of acceptance and restrict it to credit cards, but they do not require the same percentage on every card. The practical obstacle is usually your terminal and the complexity of explaining it.
Does this mean my processor is not at fault for a high rate?
It means part of the rate is not their doing. The part that is their doing is the markup, and that is the part worth comparing. Separating the two is the whole exercise.
Why does my rate change month to month with no pricing change?
Almost always card mix. A month with more premium cards costs more, with identical pricing and identical volume.