How to Lower Interchange Fees


Interchange fees are charged to processors and merchants by issuing banks and card brands for the services they provide. You can look at them as the wholesale cost of accepting credit cards at your business.

Since these are fixed costs and Stax by Fattmerchant does not mark them up (you pay what we pay), there is little that can be done to reduce these fees. However, there are some best practices that can keep them at a minimum. Downgrades, or when transactions don’t qualify for the lowest interchange rate, are what you want to avoid. 


Merchant Category Code (MCC)

Every merchant is assigned a code based on their products and industry. These classifications are assigned based on criteria created by Visa, MasterCard, and the other card brands and are used to identify types of merchants, such as gas stations or doctor’s offices. Some categories of merchants, such as charities, are given lower interchange rates. It is important to make sure your business is classified correctly so that you are charged the appropriate interchange rates.


Swiped/Chipped vs. Typed

You get one interchange rate for swiping/chipping a card and a higher rate if you key in that same card number by hand  - either because the card is not present or the magnetic strip is damaged. You should swipe all cards whenever possible.


Address Verification Services (AVS)

You can still save money even if you have to key in all of your card transactions. Using AVS will check the address provided at the time of sale against the address that the cardholder’s bank has on file. If the address does not match, you may have someone other than the true card owner in front of you. The best interchange rates are achieved by always using AVS on card not present transactions.


Batch Settlement

This one is a little surprising, but not settling your batch every day can lead to downgrades. In this case, your entire batch can be charged a higher interchange rate, not just a single transaction. Be sure to settle your batch each day or even better, set up a daily auto-settlement.


Authorization and settlement should match

Picture a restaurant where a sale is authorized for $20 and then settled for $25 after the $5 tip is added at the end of the night. This transaction will experience higher interchange fees for this mismatched transaction amount. Another example would be an order authorized for $100 and then settled for $115 after the shipping is calculated and added. Whenever possible, request authorization for the exact amount you will be charging.  


Enhanced Data

Also referred to as Level 2 and Level 3 processing. Submitting enhanced data with your transaction information can lower your total fees significantly. The downside? It only applies to business and government cards. If you take a lot of those cards, you will want to include tax amount, your tax ID number and a few other details with your transactions. Stax by Fattmerchant has a special portal that can accommodate these extra fields. This can lower your total cost by .50%-1.00% of your total processing volume if you have the ability to collect the necessary information.


We hope the best practices outlined here are able to save you even more money beyond Fattmerchant’s already low fees. Please see the associated articles below for more information on these topics: