Interchange vs markup: which part of a card fee you can actually change

The three layers inside every card fee

Every time a customer taps a card, the cost that reaches you is built from three separate parts. Two of them are the same for everyone in the country and cannot be discounted by any provider. The third is the only thing that differs from one offer to the next.

• ·Interchange — set by Visa, Mastercard and the other networks, and paid to the bank that issued your customer's card.
• ·Assessments — the networks' own smaller cut, kept by Visa or Mastercard themselves.
• ·Markup — what your provider adds on top for handling the transaction. This layer, and only this layer, is where two offers can genuinely differ.

Interchange: set by the networks, paid to the bank

Interchange is a transfer between banks. When your customer pays, money moves from your bank to the bank that issued the card, and interchange is the slice the issuing bank keeps for taking on the transaction. Visa states this plainly: it uses interchange as a transfer between the acquiring bank and the issuing bank on every transaction, and merchants do not pay it to Visa directly.

The practical consequence is the single most useful thing to know in this whole subject: nobody can sell you a discount on interchange, because your provider never had it to give. A pitch that promises to beat interchange is describing something else and calling it interchange.

• ·It is published by the networks, not negotiated with your provider.
• ·It varies by card type — a rewards credit card costs more to accept than a plain debit card, which is why your bill moves when your customer mix moves.
• ·For debit cards, federal Regulation II caps what the largest banks may charge, so the debit portion of your bill is bounded by rule rather than by your provider.

Assessments: the networks' own small cut

On top of interchange, the networks keep a much smaller amount for themselves. Like interchange, it is fixed, it is the same for every business, and it is not a place where any provider can compete. It is worth naming only so that you do not mistake it for markup when you read your bill.

Markup: the only part your provider controls

Everything left over after interchange and assessments is your provider's markup. This is the entire surface on which one offer beats another. When two providers quote you different numbers for the same business, the difference is here — never in interchange, which they both pay identically.

Markup can be shown honestly, as a stated amount added on top of the networks' cost, or it can be hidden by blending everything into one average number so you cannot see where the networks' cost ends and the provider's begins. A blended number is not dishonest by itself, but it is designed to be hard to take apart, and taking it apart is exactly what protects you.

How to see the split on your own bill

You do not need the exact interchange table to make a good decision. You need to know that your bill has a floor you cannot change and a layer on top that you can, and then compare offers on the layer that actually moves.

• ·Add up every fee on the statement, not only the headline per-transaction line.
• ·Note which lines are described as pass-through — those are the networks' floor and are the same everywhere.
• ·Treat everything else — monthly fees, statement fees, batch fees, any per-item markup — as the provider's layer, because that is what a different provider could quote differently.
• ·Do it across three months, so one chargeback or one annual charge does not distort the picture.

What this means when you compare two offers

Once you know the floor is shared, the comparison gets simple. Ask each provider to state their markup plainly, on top of the networks' cost, rather than as one blended average. The one that will do that is telling you where the negotiable line sits; the one that will not is keeping it hidden for a reason.

If you would rather not pull the numbers apart yourself, send us last month's statement and we will mark which lines are the networks' floor and which are markup, and give you the real effective rate — the single figure that folds the whole stack into one comparable number. It is free and there is nothing to sign. We are a reseller, so we earn only if you eventually switch and process; that is the bias, stated up front, so you can weigh the analysis knowing where it comes from.