Interchange and Card Network Fees
Interchange Downgrades Explained
Interchange downgrades can significantly impact your merchant processing fees, often increasing costs without clear explanation. Understanding what interchange downgrades are and how they occur is essential for businesses looking to optimize their payment processing expenses.
What Are Interchange Downgrades?
Interchange downgrades happen when a transaction is processed under a less favorable interchange category than it qualifies for, resulting in higher fees. This can occur due to missing or incorrect transaction data, such as incomplete cardholder information or improperly submitted authorization codes.
Common Causes of Interchange Downgrades
- Incorrect or missing merchant category codes (MCC)
- Failure to submit address verification service (AVS) or card security code (CVV) data
- Using the wrong transaction type or processing method
- Incomplete or inaccurate authorization data
- Processing card-not-present transactions as card-present
These downgrades increase the interchange fees charged by card networks, which are typically passed on to merchants by their payment processors.
How to Identify and Prevent Interchange Downgrades
Regularly reviewing your merchant processing statements is key to spotting interchange downgrades. Using a tool like Merchant Statement Scanner can help by automatically analyzing your statements and highlighting potential downgrades. You can also upload and scan PDF statements for a detailed breakdown of fees.
To prevent downgrades, ensure your payment processing systems capture and transmit all required transaction data accurately. Work closely with your payment processor to confirm that transactions are categorized correctly and that your merchant account settings are up to date.
Next Steps for Merchants
- Scan your merchant statements with Merchant Statement Scanner for fee analysis
- Review transaction data capture processes to ensure completeness and accuracy
- Consult with your payment processor about proper transaction coding and submission
- Train staff on best practices for processing transactions
- Monitor monthly statements to catch and address downgrades promptly
By understanding and addressing interchange downgrades, merchants can reduce unnecessary fees and improve their overall payment processing efficiency.
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