How does Visa’s interchange rate compare to other credit card companies?
If your business accepts card payments, chances are you're familiar with the transaction fees you pay as a merchant. This is known as interchange rates or interchange fees, and is meant to cover the bank’s operating costs, including transaction processing, fraud prevention, and maintaining the payment network infrastructure.
These fees have the potential to impact the prices of your products or services and understanding how card processing costs compare across providers is crucial, as it can be the leverage your business needs in effectively managing your merchant fees.
Let’s take a deep dive into the interchange rates and see how Visa stacks up against its peers in the global market.
Understanding interchange rates
Interchange fees are set by card networks, with each network having its own schedule of interchange rates. Of the four main types of credit cards - Visa, Mastercard, American Express and Discover — Visa is by far the most common. In the US for example, Visa makes up to 52.8% of cards in circulation. This is way above Mastercard, which only comprises 31.6% of cards in the US, leaving Discover and American Express both in single digits.
When a customer purchases from your business using a credit card or debit card, the acquiring financial institution (or ‘merchant acquirer’; usually the bank processing the payments for merchants) will pay a small percentage of that transaction to the cardholder’s bank as an ‘interchange fee’. Your business then pays the interchange fee back to the acquirer as part of its card processing fees.
Interchange fees make up the most significant chunk of card processing fees, estimated to be around 70% to 90% of the total fee amount. With this in mind, interchange rates are simply the rates at which the interchange fees will be charged to your business. To simplify the fees, credit card companies usually offer them as a flat rate plus a percentage of the sales total (including taxes).
Factors influencing interchange rates
Several factors play a role in determining interchange fees. These include the type of card used, the type of transaction, whether the transaction is cross-border or local, whether the transaction is ‘card present’ or ‘card-not-present', and the merchant’s category code. Each card network has its fee structure based on these factors, resulting in a diverse range of interchange rates.
As a business owner, it’s vital to analyse and understand the interchange rates associated with different card networks. By doing so, you can effectively assess the impact these rates have on your bottom line and make informed decisions about pricing your products or services.
Visa’s interchange rates in the US
As one of the most widely used card networks globally, Visa interchange rates are a significant point of interest. The table below illustrates Visa’s interchange fees in the United States, one of its largest markets:
Visa interchange rates
Visa debit card
| Type of Visa debit card | Card present | Card not present |
|---|---|---|
| Visa Debit (small bank) | 0.8% + 15c | 1.65% + 15c |
| Visa Debit (big bank/regulated) | 0.05% + 22c | 0.05% + 22c |
| Visa Debit Prepaid | 1.15% + 15c | 1.75% + 20c |
Visa credit card
| Type of Visa credit card | Card present | Card not present |
|---|---|---|
| Visa Credit Basic | 1.51% + 10c | 1.80% + 10c |
| Visa Rewards Traditional | 1.65% + 10c | 1.95% + 10c |
| Visa Rewards Signature | 2.30% + 10c | 2.70% + 10c |
| Visa Rewards Signature Preferred | 2.10% + 10c | 2.40% + 10c |
| Visa Business | 2.20% + 10c | 2.25% + 20c |
| Visa Corporate | 2.50% + 10c | 2.70% + 10c |
Visa interchange rates in comparison to its competitors
How do Visa’s rates compare with those of Mastercard, American Express and Discover? The tables below highlight how Visa International’s interchange rates stack up.
| Interchange rate type | Visa | Mastercard | Discover |
|---|---|---|---|
| Debit, card present, big bank | 0.05% + 22c | 0.05% + 22c | 0.05% + 22c |
| Credit, card present, standard | 1.51% + 10c | 1.58% + 10c (Consumer) | 1.56% + 10c (Consumer) |
| International | 1.10% | 1.10% | 1.20% |
American Express, comparatively, has a more complex fee structure. For the other three networks, it's the type of card and payment method that determines the interchange rate. But for Amex cards, it's the transaction size and merchant category that determines the interchange rate.
| Transaction size and merchant category | Interchange rate |
|---|---|
| Amex Retail under $75 | 1.60% + 10c |
| Amex Services under $400 | 1.60% + 10c |
| Amex Restaurants under $25 | 1.85% + 10c |
| Amex Lodging under $100 | 2.25% + 10c |
| Amex Mail Order under $150 | 1.70% + 10c |
| Amex Prepaid under $75 | 1.35% + 10c |
A global view on interchange rates
Interchange rates vary across the globe. There are significant differences between interchange rates in the US, Europe, and Asia. European regulators have worked to reduce interchange fees drastically, leading to a more competitive landscape.
Consumer credit cards are regulated in Europe and are capped at 0.30%. China and Australia have also implemented regulations to bring their fees to 0.35% and 0.50% respectively. Canada and the United States have less regulation, so interchange fees in North America and Canada are some of the highest in the world. Visa and Mastercard generally work together and agree to limit fees to a certain level, particularly in Canada.
When exploring Visa’s interchange rates globally, it’s essential to work with a payment processing partner that offers transparent fees and competitive rates to ensure that your business can accept a wide range of payment methods in a cost-effective manner.
The impact of interchange rates
For merchants, Visa interchange rates determine card processing costs, which can directly affect business profitability. High interchange rates can eat into a merchant’s profits, especially for businesses that rely heavily on card transactions. Smaller retailers or businesses with tight margins may feel the pinch more acutely.
On the consumer side, interchange fee impact can increase the cost of goods or services, as merchants attempt to cover their credit card processing costs.
Why choosing the right payment processor helps lower your cross-border transaction costs
Making sure you’re choosing the right payment processor is one way for businesses to shield themselves as much as possible against fluctuating interchange rates. The right payment processor for your business will depend on:
Your industry
The volume of your transactions
Your customers’ needs and their payment processes
The types of transactions being made with your business, e.g. recurring or once-off
The average size of the transactions being made with your business
Your business’s geographical reach
For example, if you have global customers, your business may benefit from choosing a payment processing method that allows your customers to easily pay you in their preferred currency, via their preferred payment method (and allows you to skip the foreign exchange fees on your received payments). Check out Airwallex as a way to lower the cost of your cross-border transactions and boost your global payment acceptance rates.
Navigating the complexity with Airwallex
Understanding the interchange rate can help your business make smarter decisions when accepting different currencies from your customers around the world. With Airwallex Payments, you can collect payments from your global customers in their preferred currencies while reducing foreign exchange fees, and boosting payment acceptance rates. Find out more here.
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