Interchange: Meaning in a Merchant Cash Advance
Interchange is the fee a card-issuing bank charges on each card transaction, set by the card networks and paid by the business through its processor. It makes up most of the total cost of accepting cards.
What does interchange mean?
When a customer pays by card, several parties take a small cut. The largest share goes to the customer's bank as interchange. The card network adds its own assessment, and the processor adds a markup. Rates differ by card type, transaction type and industry, with rewards cards and card-not-present sales usually costing more.
Why does interchange matter to your business?
Interchange isn't a financing cost, but it shapes how much of each sale reaches your bank. When a funder sizes an advance from deposits, it sees sales after these fees. Pricing models also matter: interchange-plus pricing shows each fee separately, while flat-rate pricing bundles them, which makes it harder to see what you're paying.
What should you ask your processor?
- Is my pricing interchange-plus, tiered or flat-rate?
- What is your markup above interchange?
- Which of my transactions fall into the highest-cost categories?
Why do owners look at interchange?
Lowering card fees is one of the few ways to raise deposits without more sales. Every point saved lands in the same account a funder reads.
How do surcharges and cash discounts work?
Some businesses pass part of the card cost to customers through a surcharge or a cash discount. Card network rules and state laws limit how this works, so check both before adding one to your prices.
Where will you see it?
On processing statements, where it shows as a line or a set of lines by card type. In processor pricing sheets. In the rate tables the card networks post on their own sites.
Which terms are related to interchange?
The full list is in the glossary. Owners ask about this in Do cash deposits count toward an MCA?.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.