Visa and Mastercard have both announced that there will be changes to their fees in the upcoming 2013 Interchange.
Visa will be increasing its card-brand fee from 0.06% to 0.08% and its Canadian Dollar cross-border fee from 0.10% to 0.40%.
In June 2013, Mastercard will be increasing its card-brand fee from 0.064% to 0.077%. Harmonized Sales Tax (HST) will now be charged to the payment processor (Helcim) on card-brand fees and cross-border fees. This makes the effective card-brand fee for Visa 0.0904%, and the fee for MasterCard is 0.0870%. Fees that are still exempt from sales tax at this time are Interchange, per transaction and monthly fees.
What is Interchange?
Every time you process a card, a fee is transferred from the acquiring bank (your bank, as the merchant) to the issuing bank (the bank that issued the card to your customer). This fee is called interchange and it is the main fee for processing credit cards.
How Do I Pay Interchange?
The customer’s bank pays your bank the purchase amount, after taking off the interchange fee. (This isn’t the only fee you pay – you also pay fees to your credit card processor, and what these fees are depending on the pricing structure used by your credit card processor. Many processors use tiered pricing; at Helcim we use Interchange+ plus because we feel that this is the most transparent and cost-effective method.)
What Impacts Interchange Fees?
Each transaction has an interchange fee, and what that fee is will depend on a few different criteria, including:
- how you accept the payment - is the card present or not present? Interchange fees are higher for card-not-present transactions as there is more risk associated with these purchases.
- the level of data supplied on the card that accompanies each transaction (there are three levels of data; the more data, the more secure the transaction and generally, the lower the interchange rate)
- what category you fall under as a merchant
- the type of card being used: credit or debit, personal or business
What does this mean for my business?
While these changes are minimal, the Canadian Code of Conduct allows merchants to cancel their account without penalty anytime a rate change is announced. This means that any merchants currently stuck in a contract with their bank-owned processor should take the opportunity to contact us; switch to Helcim and enjoy the savings of our Cost+ pricing!