Card-payment pricing can appear deceptively simple. A business accepts a payment, the customer receives their purchase and the proceeds reach the merchant’s account. Behind that transaction, however, are several participants and different cost components.
One of those components is interchange.
What is an interchange fee?
In simple terms, interchange is a fee paid between the financial institutions involved in a card transaction. It is generally paid by the merchant’s acquiring institution to the institution that issued the customer’s card.
It is not necessarily the same as the total fee appearing on your merchant statement. The total cost of accepting a payment may also include scheme fees, acquiring or processing charges, terminal costs, software fees and other service charges.
Interchange can vary according to factors such as:
- Whether a debit, credit or premium card is used
- The applicable card network and product
- Whether the payment is made in person or remotely
- How the transaction is authenticated and processed
- The commercial pricing arrangement applying to the merchant
This is why two payments for the same dollar amount may not always have exactly the same underlying cost.
Start with your merchant statement
You do not need to become a payment-industry expert, but you should be able to understand what your business is paying.
Start by reviewing several recent merchant statements and asking:
- What is our effective cost relative to card turnover?
- Which fixed and variable charges apply?
- Are we paying separately for hardware or software?
- Does our pricing structure suit our transaction profile?
- Are there services included that we no longer use?
- Are remote and in-person payments being handled appropriately?
Comparing only a headline rate can be misleading. The more useful measure is the total commercial and operational cost of the arrangement.
Your operating environment matters
A busy hospitality venue may value portability, speed and resilience during peak periods. A retailer may need multiple checkout devices. A service business may need payments at reception and eventually require invoicing or recurring-payment options.
The right payment technology should reflect these differences. Using a properly configured card-present solution for in-person transactions may also help avoid unnecessarily treating those payments as remote or card-not-present transactions, subject to the provider’s setup and pricing.
Sphere helps businesses assess Clover solutions based on their operating requirements—not simply select a terminal from a list. That means considering where payments happen, who accepts them, what supporting tools are required and how the business may evolve.
Interchange may be largely invisible, but your overall payment costs should not be. A little more understanding can lead to better questions, better comparisons and a payment arrangement better aligned with your business.
Next step: Ask Sphere to help you review your current payment environment and identify the Clover setup that best matches how you operate.