Interchange rates and fees are established by Visa MasterCard and are generally paid by financial institutions called “acquirers” that provide card acceptance services to merchants. Acquirers pay these fees to card issuers. Interchange rates/fees are only one of the many cost components of the Merchant Discount Rate (MDR) that is established by acquirers and paid by merchants in exchange for card acceptance services.

So you are wondering why am I posting the actual rates charged by Visa and MasterCard? Well, if you want the best pricing you should know what exactly the spread of profit from Visa MasterCard your Merchant Service Provider (MSP) is. Not all is equal in this area and many MSP mask profit through slick marketing practices but one thing is sure if you divide your total monthly fees into your monthly credit card statement you will come up with an effective rate being charged you. That is it! You should always be concerned with that and not the hook 1.12% offered rate. Too good to be true, well it is!

Here is the Visa Interchange rates

Here is the MasterCard Interchange rates

Just look at them all, it is a lot to take in but later we will discuss what you should be concerned about when negotiating the best deal in merchant processing.

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Independent Sales Organization (ISO), also called a Member Service Provider (MSP) is an outside company (not a MasterCard or Visa member) that is contracted by a member bank (each member bank may be a member of Visa or MasterCard, or both) to procure new merchant relationships for the specific bank.

They usually sign up the merchant and explain the terms and rates of a credit card merchant account or cardholder relationship. After signing up, the ISO either submits the paperwork to an acquirer for underwriting or underwrites the account internally. After the merchant is approved, a Processor is then used to actually process the merchant’s transactions. In many cases, the ISO is also responsible for providing ongoing customer service after the merchant has been boarded. Technical support or terminal support is generally provided by the Processor, Payment Gateway, or the individual software or hardware vendor providing the payment acceptance device.

ISOs generally recruit Merchant Level Salespeople (MLS) to go out and solicit merchants. MLS are mostly 1099 independent contractors who work for upfront commissions and the right to receive ongoing monthly residuals for the accounts they refer to the ISO.

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The Electronic Transaction Association or ETA provides merchant business owners some great information. This is the real deal and our friends over at the NAMAA should study and replicate successful associations. They are credible and a great starting point to any business owner who is searching for a merchant service provider.

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