The first step is understanding how a transaction gets processed.  The diagram to the left shows this simple process.  Second is to understand how the fees are charged.  As you can see there are three players involved in the transaction process.

1. The CARD ISSUING BANK this is the bank that issued the credit card. Example Chase Bank®, Wells Fargo® or Bank Of America®

2. The ACQUIRING BANK is the processor that communicates to receive an authorization on a credit card.

3.  The PAYMENT BRANDS are Visa®, MasterCard®, Discover® and Amex®.

Know who makes what portion of the total fees collected from your merchant account.

Both Visa® and MasterCard® adjust rates twice a year. Every spring and fall these go into effect. Now this is what the processors love because it gives them a reason to raise your rates and make more profit on your account. Typically when rates are adjusted some rates increase and some actually decrease, however if you're setup on a tiered program you won’t ever see your rates decrease because the processor will keep the difference as profit. Frequently new interchange levels are added by Visa® and MasterCard®. So let's say you have 30 interchange levels that are getting billed at the qualified rate and Visa, MasterCard either increases one rate or adds a new interchange. What happens is most processors will raise the entire tier on the merchant to compensate for the increase even though maybe only 5% of your transactions would be affected by this increase or new interchange level. So every 6 months you will notice that your rates will be increased. When you have an Interchange Plus program you will always pay the exact interchange level cost. So you know the processor isn’t making anything extra on your account and if a rate decreases that saving will be passed to you as well. This is a much cleaner way to do business without hiding information from you as a merchant. Most agents don’t even know how Interchange Plus pricing works, therefore they sell you what is easiest or what they can make the most money because that is what they are taught by the processor.

Visa and MasterCard has created a special Business-to Business (B2B) and Business-to-Government (B2G )interchange category that offers lower processing rates on all Visa business, commercial, purchasing and government credit card transactions. The B2B rate can be any where to 0.50% to 0.75% percent lower that a merchant pays for interchange or more than the normal processing rates offered to other industries. Sentry Vault Payments has a list of eligible industry types that can take advantage of these savings. The B2B rate will reduce your monthly processing fees by an average of 10-20%. When processing large transactions over $5000, Sentry Vault Payments can help you reduce your interchange fee even more by passing extra data.

Many businesses need to process credit card payments that average over $5,000 per transaction. The Card Associations (Visa) have specific interchanges that address these requirements which minimizes the costs of processing theses transactions.  Businesses that qualify in this category often process transactions capturing level 2 and level 3 data for corporate and government cards. Level 2 data is designed to support B2B credit card transaction, since the majority of the cards accepted in this environment are corporate cards. Level 3 data is designed to support business-to-business and business-to-government payment processing, the majority of the cards accepted in this environment are corporate and government cards.

MasterCard states that any convenience fee must comply with the following:

-Must be properly disclosed to the cardholder in advance

-Cannot discriminate against or discourage use of the MasterCard cards or brand in favor of any payment acceptance brand deemed by MasterCard to be a competitive brand, including American Express, Discover, and Visa

-Doesn’t have to be assessed on cash, check, automated clearinghouse (ACH), or personal identification number (PIN) based debit payments

-Can be assessed as either a flat per transaction fee, a variable or tiered rate fee based on the amount owed, or a fixed percentage of the amount owed.

-Elementary and secondary schools for tuition and related fees and school- maintained room and board

-Colleges, universities, professional schools and junior colleges for tuition and related fees and school-maintained room and board

-Local, state and federal courts of law that administer and process court fees, alimony and child support payments

-Government entities that administer and process local, state and federal fines

-Local, state and federal entities that engage in financial administration and taxation

-Government services - merchants that provide general support services for the government

-Additionally, MasterCard (unlike Visa) will permit a variable convenience fee to be assessed in connection with Debit MasterCard® transactions in card acceptor business code (MCC) 9311—Tax Payments. Also, note that Visa allows only a fixed or flat convenience fee payment amount, unlike MasterCard which allows a variable fee.