Types of Card Payments
There are three main types of payment card transactions: credit, signature debit, and PIN debit.
For PIN debit transactions cardholder charges are posted immediately following the receipt of the authorization message. For credit and signature debit transactions, the issuer usually posts the transaction to the consumer’s account within one day of the transaction.
An interchange fee may be assesses as a flat fee per transaction, a percentage of the purchase price, or a combination of the two.
Credit Card v Debit Cards
Interchange fees for credit and signature debit transactions are higher than those for PIN debit transactions. In the United States, interchange fees for PIN debit typically average $0.35 to $0.50 per transaction;.
Interchange fees for a typical signature debit transaction are about 1.2 percent of the transaction value. Interchange fees for a typical credit card transaction for range from approximate 1.5 to 2 percent of the transaction value.
Interchange fees vary by merchant type (e.g., grocery store, department store, fast food restaurant); merchant sales volume, and credit card program within a network. For example, “premium” cards such as gold or platinum cards carry higher interchange fees than “basic” cards.
Card Brands Set Interchange Rates
Each card network sets the structure and level of interchange fees and specifies operating rule. Network operating rules cover such actives as merchant card acceptance practices, technological specifications for cards and terminals, risk management, and determination of transaction routing when multiple networks are available for a given transaction.
The operating rules requires a merchant to agree to all types of cards regardless of the identity of the card issuer or specific card program.. This type of universal acceptance requirement is commonly referred to as an honor-all-cards rule. These rules are important to merchants because interchange fees may vary across card programs an merchants must accept premium cards that carry higher fees as well as basic cards.
Another important operating rule is the no-surcharge rule, which prohibits a merchant from adding a surcharge to a customer’s bill if the customer pays with one of the network’s payment cards. The exceptions to this rule include payments made to some government entities and tuition payments to educational institutions. The networks do not allow merchants to offer discounts for cash payments.
Work with a good payment processing provider to get the best rates.
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