Card Brands Publish New Interchange Rates- Will Your Rates Go Down?

Accepting credit cards is about to get a bit more expensive for many businesses.

That’s because businesses are about to get their first statements reflecting the new Interchange rate increases for 2022. 

After delaying their proposed rate increases twice during the pandemic, all the major card brands published new Interchange rates effective April, 2022. The major card brands have introduced updated rates for both in-store purchases as well as online, card-not-present transactions. The rate hikes will affect most major merchants across the board that process credit card payments both in retail and with an eCommerce merchant account.

They’re also raising rates for certain card types as well as specific business categories. Rates are going up to process transactions for all those rewards cards consumers like to use, specifically airline miles cards. Small and medium-sized grocery stores and restaurants will feel the crunch as well. 

However, they're also reducing rates and creating new Interchange programs for certain business categories. For example, MasterCard is lowering rates for Day Care and merchants who process numerous micro-transactions (under $5). 

Visa created a new program that cuts fees for businesses that process less than $250,000 in Visa card volume. 

They are also focusing on merchants who have yet to upgrade to EMV compliant terminals and don’t use security features such as tokenization. Interchange rates will increase for all merchants that accept credit cards online and do not tokenize the transactions to protect cardholder data. The major card brands will also be increasing the fee charged for non-EMV compliant transactions.

When all said and done, the new fee increases will add up to an estimated $475 million additional income for the card brands. That might seem like a staggering number, but it's important to remember that both the card network and card brands use these fees to continually improve the entire payment ecosystem. The fees fund developing innovations, increasing security and fraud prevention, and fund rewards programs. 

Even so, merchants are increasingly frustrated by the sheer amount of their bottom line spent to accept credit card payments. Here is a partial breakdown of some of the changes each card brand published.

The following new fees and assessments are effective as of April 1, 2022:

The April 2022 Interchange Rate Update includes fee increases and updates from major card brands.

Visa, Mastercard, Amex, and Discover all increased their non-EMV assessment fee effective 4/1/22. Going forward all non-EMV transactions will be charged a fee of 1%, up from the previous 0.65%. 

Visa Fee Changes:

Visa AVS -

Visa Address Verification Services Fee (AVS) of $0.001/per transaction where a usable result match is received. This includes results for full match, partial match, and no match.

NON-tokenized card-not-present transactions

Visa increased the Interchange rate for non-tokenized card-not-present transactions. All Visa credit transactions that are tokenized will remain under the current Interchange rate.

Remember, there is a specific Interchange rate for each card type processed. For example, traditional credit cards, rewards cards, and corporate cards, each qualify for a specific rate category.

Under the new fee structure, merchants who do not tokenize their transactions will pay a higher rate to process their transactions. 

MasterCard Fee Changes:

Decline Reason Code Service (DRCS) Fee-

Mastercard will introduce a Decline Reason Code Service (DRCS) Fee of  $0.02 for card-not-present transactions. This will only apply when MC sends a Merchant Advice Code (MAC) in the event that the card issuing bank doesn't.

Digital Enablement Fee expansion-

Mastercard is expanding the billing structure of the Digital Enablement Fee (DEF) to include card-not-present authorizations. They also created three tiers for Digital Enablement fees based on minimum, middle, and maximum transaction amounts. 

The new structure is as follows:

Digital Enablement Transaction amount tiers:
Minimum - Less than $99.99 fee $0.02

Mid - $100 - $999.99 fee 0.02%

Maximum - More than $1,000 fee $0.20

As a result of this expansion, MC will be eliminating several fees from their structure. The following DEF fees will no longer exist: AVS Card-Not-Present fee, CVC2 Fee, ASI Interregional/Intraregional, and Digi Enablement/CNP Fee.

Reporting and Infrastructure Fee reduction-

MasterCard will Reduce the Reporting and Infrastructure Fee from $0.0003 to $0.0002.

American Express OptBlue Pricing and Program Updates:

American Express is introducing one new fee and one increased fee that will be applied to all AMEX card charges. 

There will now be an Acquirer Transaction Fee of $0.02 and an increased Assessment Fee from 0.16% to 0.165%.

Discover Fee Updates:

Discover is introducing three new fees and increasing a current fee.

Account Verification Service Fee of $0.02 per request.

Address Verification Service Fee of $0.005 per request. 

Digital Investment Fee of 0.01% of the sale amount.

Discover is updating its Discover Acquirer Assessment Rate from 0.13% to 0.14%.

New Interchange Programs were introduced by most major card brands.

All major Card brands also introduced new Interchange Programs for specific merchant categories as well as other Updates. These updates and programs became effective on April 22, 2022.

Visa Interchange Program Updates effective April 22, 2022

Visa introduces Fee updates/Programs for Specific Merchant Segments Effective April 22, 2022

Visa increased interchange rates for non-tokenized card-not-present transactions for specific merchant categories. Merchant categories include:

• Restaurants
• Taxi 
• Real Estate
• Education
• Advertising
• Insurance
• Telecommunications and Cable

For example: Real Estate, Education, Healthcare, Insurance, for tokenized CNP transactions, merchants will pay the existing rate of 1.43% + $0.05.

However, non-tokenized CNP transactions rate will increase to 1.53% + $0.05.

Advertising and Services, rates for tokenized CNP transactions, will be 1.55% + $0.10 and non-tokenized CNP rates will be 1.65% + $0.10.

Visa New Interchange Programs and rates for Small Merchants

Visa is introducing new rate programs for small merchants. There will also be lower “preferential” rates for eligible small merchants. 

Visa determines eligibility based on total U.S. domestic credit transaction volume of $250,000 or less. Credit card processing costs have a huge impact on Small Businesses. Estimates show that businesses that are eligible for the Small Business Interchange Program make up almost 90% of U.S. merchants. This new program will effectively cut Interchange rates up to 10% for eligible merchants.

MasterCard Interchange Updates effective April 22, 2022

MasterCard introduces Fee updates and new Interchange Programs (IP) for several Specific Merchant Segments:

• Airlines Interchange Program
• Convenience Purchase Base IP
• Merchant UCAF* Entered IP
•  Full UCAF* Entered IP
• Key-Entered IP
•  Lodging, Auto Rental and Cruise IP
• Insurance IP
• Real Estate IP
• Daycare IP
• Passenger Transport IP
• Restaurants IP
• Standard Entered IP
• Supermarket IP
• Travel and Entertainment IP
• Utilities IP
• Consumer Credit Refund IP
• Small Ticket Rates IP

Merchants can find a more thorough breakdown of all policy changes, fee increases, and compliance requirements on the Chase website.

How to keep your credit card processing rates in check

The major card brands update their rates marginally twice a year in April and October. While there isn't a lot merchants can do about Interchange rates, there are ways to avoid excess fees and optimize your rates for your business. The best thing merchants can do is take a proactive role in their Payment Processing and partner with an experienced and transparent Merchant Services Provider.

Choose Interchange Plus Pricing

First, make sure your merchant account is priced with Interchange Plus pricing. This is the only pricing model where the exact Interchange base rates are revealed and passed straight through to the merchant. Tiered pricing hides the base rates within each tier and combines them with the processors mark-up. Merchants have no way of knowing how much of the rate is Interchange, and how much is the mark-up. Also, Interchange Plus is more transparent because some processors take advantage of rate increases to add their own mark-up on top of the Interchange rate increase. 

Check your Merchant Category Code

They’ve also added some new Merchant Category Codes (MCC) for some industries to help make pricing more accurate. It's always a good idea to check with your merchant account provider to make sure that your rates are optimized properly for your business. Many times a more correct MCC can actually save money for a business. 

Increase security by turning on card data tokenization.

Make sure you're processing payment card data using tokenization. Tokenization is a function of your payment gateway or the POS system. Merchants can avoid the extra fees for processing non-tokenized card-not-present transactions by making sure their merchant service provider uses tokenization.

Upgrading to EMV compliant terminals to avoid EMV non-compliance. 

As we’ve pointed out, all major card brands are increasing their non-EMV assessment fees. All transactions processed through Non-EMV compliant terminals will be subject to a 1% non-EMV assessment fee. This can really add up for merchants. This applies to all card-present transactions using old terminals or POS systems that do not accept chip or tap-to-pay.

Maintain PCI compliance 

Maintaining payment card data security is a top priority and Best Practices for all businesses. Lack of meeting PCI Data Security Standards is a source of significant fees for merchants who do not comply. But it is going to become even more important as many processors are escalating their non-compliance fees.

If your statement is too confusing, or your provider won’t help you understand your rates, call us today. Our highly experienced merchant account advisors are happy to help you get the most out of your merchant account.