Credit card Interchange fees can significantly impact a business’s operating costs, pricing strategies, and overall profitability. By understanding how these fees work and implementing effective strategies, businesses can achieve substantial cost savings and improved financial health. Here, we explore various methods to lower credit card fees, supported by key statistics and insights.

What Are Interchange Fees?

Interchange fees are transaction fees charged between banks for processing credit and debit card payments. These fees are typically set by card networks like Visa, Mastercard, Discover, and American Express​​.

How Interchange Fees Are Calculated

Interchange fees are determined based on several factors, including:

  • Type of Card: Different cards (e.g., credit, debit, rewards) have different fee structures.
  • Transaction Method: Card-present transactions generally incur lower fees than card-not-present transactions due to lower fraud risk.
  • Merchant Category Code (MCC): Fees can vary by industry.
  • Size of Transaction: Larger transactions can sometimes incur lower percentage fees.
  • Processing Details: The way a transaction is processed (e.g., swiped vs. keyed-in) also affects the fee​​.

Interchange Pricing Models

Payment processors use different pricing models, including:

  • Interchange Plus Pricing: Transparent, with businesses paying the exact interchange fee plus a markup.
  • Tiered Pricing: Groups transactions into tiers, each with its own rate.
  • Flat-Rate Pricing: A fixed percentage or flat fee per transaction.
  • Subscription/Membership Pricing: Monthly fees in exchange for lower per-transaction costs​​.

Strategies to Reduce Interchange Fees

  1. Negotiate with Processors: Businesses can negotiate lower fees based on transaction volume and loyalty​.
  2. Improve Card Processing Practices: Encouraging in-person purchases and using security checks like AVS can lower fees​.
  3. Encourage Debit Card Transactions: Debit transactions often have lower fees compared to credit transactions..
  4. Implement Surcharges: Passing fees onto customers can offset processing costs. Surcharges are typically 1-4% of the purchase amount​​.
  5. Offer ACH Payments: ACH payments do not incur interchange fees, providing a cost-effective alternative to credit card transactions​.

Leveraging Open Banking and ACH Payments

Open banking and account-to-account (A2A) payments can significantly reduce transaction fees. These methods bypass traditional card networks, resulting in lower fees. For example, A2A payment providers offer transaction fees as low as 1%, compared to traditional credit card fees of up to 3.5%​​. Real-time A2A payments also settle immediately, reducing the risk of fraud and chargebacks​​.

Reducing Fraud to Lower Fees

Fraud prevention plays a crucial role in managing credit card fees. Card-not-present transactions have significantly higher fraud rates (0.93%) compared to card-present transactions (0.06%)​ ​. Implementing advanced security measures like EMV chip technology and address verification systems can lower interchange fees by reducing fraud risk​​.

SensePass: A Solution for Digital Wallet Transactions

SensePass offers an innovative approach to reduce credit card fees by processing digital wallet transactions directly through platforms like Venmo. Instead of using Venmo’s digital card powered by Visa, SensePass converts in-store transactions to e-commerce transactions, bypassing credit card rails. This method significantly lowers fees, as transactions occur directly through digital wallets.

Open Banking and ACH for Lower Fees and Enhanced Security

Open banking and ACH not only reduce fees but also enhance security. Transactions through these methods happen directly through bank accounts, typically incurring fees around 1%, compared to credit card fees of 2-3%. The direct nature of these transactions eliminates many fraud risks associated with traditional card payments.


By understanding and implementing strategies to manage interchange fees, businesses can achieve significant cost savings and improve profitability. Leveraging technologies like open banking and ACH, along with robust fraud prevention measures, can further enhance financial efficiency. For businesses looking to streamline payment processes and reduce fees, these strategies offer a clear path to financial improvement.

For more information on reducing credit card fees and leveraging innovative payment solutions, contact SensePass today.