April 2011 MasterCard Interchange Rates

 As you may or may not be aware, spring and fall is when you'll typically see that Visa and MasterCard make adjustments to their Interchange Rates. True to form, MasterCard has now posted their "April 2011 Worldwide U.S. and Interregional Interchange Rates". It is available for download in a PDF format at the Mastercard for Merchants website (a link to the MasterCard site is provided at the end of this article for your convenience). When you click on the website, from the home page, you'll want to scroll down and to the right where you'll find "Rates and Rules". Listed below that you will find the Download button that will provide you with the full 144 page rate sheets. Now, at first glance it may seem to be a bit daunting. But, if you just spend some time with it and review it carefully, it will all make at least some bit of sense to you. While you're at it, you might want to click on the "Learn More" button that will give you a better understanding of how all this stuff works. This is all the kind of information that has always been freely available to merchants, but most processors don't want you to know about it. While you're at the site, take your time to look around as you might just find other useful information there to take advantage of. As of this writing, Visa has not yet posted April Interchange Rates so, keep an eye out soon. I thought it might be of some help to give you a bit of an idea what you will find there once you sit down with your cup of coffee and try to decipher all the codes and jargon that you will find in the report. So, once you get to Page 6 after the table of contents and other introductory stuff in the Interchange Rate Sheets, you'll come upon the Merchant Category Guide. On Page 6 (of the Interchange Rate tables you will be downloading from the MasterCard for Merchants website), the header states, "The following table lists the Program Names of the U.S. interchange rates that generally apply to purchase transactions in each Merchant Classification. Merchants should identify the Merchant Classification (MCC) most closely related to their line(s) of business, to determine which interchange rates may apply to their transactions. The rates and key criteria associated with each interchange rate can be found in the interchange rate tables, beginning on Page 10 of the PDF report from the MasterCard website". Most, if not all, U.S. merchants are going to find their pricing for credit cards on Pages 10-34. The first thing you will notice in the left hand column on Page 6 is "Merchant Classification". You'll see things like: Airline and Passenger Railway, Cruise Line, Gas Stations and Convenience Stores, Government, Lodging and Vehicle Rental, Restaurant, Retail/Services, Supermarket/Warehouse etc., etc. Certainly, you'll fall into one, or maybe a couple, of those classifications. Each "Merchant Classification" comes with its own set of risks and nuances which will dictate what kind of interchange rates will be assessed on their credit/debit card transactions. This article is not meant to be an exhaustive knowledge resource in all the different classifications and rates. It's meant to give you at least a guide to understanding what you will be looking at. So, with that in mind, let's just take a look at a couple examples from page 11 of the Interchange Sheets that will likely fit the majority of business owners reading this article. Here's what you'll find: The first of the three columns is Program Name. Here it tells you that this is for a Consumer Credit Card that is key entered at the POS. Next column is the Interchange Rate which, in this case is 1.89% + $0.10. The third column provides the Qualified Categories (MCC) or in this example, it describes Retail and Restaurant. The next set of columns below those described above provide all the same information except that this time, the rate shown is for a Consumer Credit card that is swiped through the POS and read electronically. You will notice that this rate is a full 0.31% lower because there is less assumed risk in the transaction. There are also four other columns with various information that is pretty much self-explanatory. If there's anything you're unsure of, check the Glossary of Terms at the back of the Interchange Rate sheet PDF. Now, getting back to what you see noted above. Let's say that you're a retailer and I come in and make a purchase and you swipe my card through your POS terminal. The Interchange Rate for that "card present" transaction will be 1.58% + $0.10. This interchange rate, if you've been reading my articles for any length of time or have enrolled in my e-course know, gets paid directly from the acquirer (your credit card processing company) to the card issuing entity. In addition to those interchange rates, there are Assessments (.11%) and Access Fees ($0.0195) and these fees get paid to MasterCard. The combination of these fees make up your processors bottom-line cost. You, of course, will be paying a Merchant Discount Rate (MDR) which will be something higher than the combination of these fees. 

 

 

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