Monday, November 4, 2013

October 2013 Interchange Adjustments

October is typically a month when new pricing adjustments occur in the merchant processing business. The credit and debit card brands, specifically Visa, MasterCard and Discover, make adjustments to their pricing structures and/or services. Once this occurs, the merchant processing companies then generally restructure some of their pricing to prevent profit loss, spread out new costs or otherwise either stay competitive or profitable. Some account managers will choose to absorb certain costs or prevent some merchants from seeing increases in their billing, however it is also possible that some of these posted increases will be used as an excuse to increase fees across the board and not simply for the actual items affected. For this reason, it is always important to read the fine print, or at least the monthly announcements on each processing statement.

Here is a quick breakdown of the recent changes from October, 2013, effective from the beginning of the month. The changes may look small at first, but remember that these tiny amounts add up when they are per transaction. For the card issuing companies, this can mean a huge increase in revenue (although, to be fair, theoretically the increases are designed to deal with corresponding costs already being incurred).

The New Costs

All Discover transactions now have
a new "Network Authorization" fee of $0.0025 for every Discover Card transaction. MasterCard has a similar new $0.0025 transaction fee every time the three digit security code (CVC2) is used. Most processing companies are likely to round these figures UP to a penny, making a tidy little profit in there even though it is the smallest amount to round up to for single transactions. However, it might be possible to get your account set up to pass this through at cost.

In addition to the credit card transaction costs, debit networks are also causing some increases. The Jeanie and Star networks now require annual "participation fees" costing $6.00 each. This follows the Pulse network fee that was implemented last August. Expect that these debit network annual fees will be marked up by the processing company.

Some merchants who are paying to accept debit cards are likely to see changes if they are on tiered pricing structures. This will vary based on several factors, including which data platform the processor is using for the merchant. For example, Global Payments or First Data... and if First Data, is it North, Omaha or Stratus. Each of these data networks has its own associated costs, adding to the overall confusion that many merchants feel regarding the pricing of their processing plans. 

Merchants should refer to their statements for notices about changes that affect their accounts, most likely the October statements, but it is worth looking at September and November statements as well.

This sort of change occurs generally in October and April of each year, and merchants who do not refer to their statements every month are at a disadvantage when it comes to catching changes proposed for their accounts. When noticing announcements of increases, it is always a good idea to evaluate how this will actually affect the merchant's bottom line and whether there is anything that their account manager could do to mitigate these new costs. However, it should be noted that in many cases it is likely that at least some of the increase may be beyond the control of the processing company.

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