Do You Know About Interchange Creep?
Learn About The Change In Interchange Rates Due to Rewards Card Usage

You may know that interchange rates vary based on merchant category (travel, retail, entertainment), but did you know that the cost of accepting credit and debit cards on your website also varies according to the type of card your Customer uses? [+/-] Read More

Interchange is the technical term for the amount paid by the merchant or acquiring bank to the credit card issuer and is the majority of the cost that retailers pay to accept Visa and MasterCard. You may know that interchange rates vary based on merchant category (travel, retail, entertainment), but did you know that the cost of accepting credit and debit cards on your website also varies according to the type of card your Customer uses?

Interchange Creep is a new term for the hidden increases in interchange fees associated with rewards cards usage by consumers. This under-the-radar interchange fee increase is caused by the increased usage of rewards cards. Reward cards cost retailers as much as $.10 per $100 more on an average sale.

For the first time, in 2005, Visa and MasterCard announced new interchange rates based on the type of card used. So, for example, transactions using reward cards cost more for the merchant to accept than non-rewards cards. ¹ In other words, you, the merchant, are paying for a consumer’s frequent flyer miles and other popular rewards.

Rewards cards are on the rise – and as rewards cards usage grows, you pay more to accept debit and credit cards than before. Currently rewards credit cards represent 50% of all preferred credit cards issued and consumers with rewards card frequently use them.² Is your business seeing increase in reward card usage?

There is an answer.
It’s called authentication and it comes directly from Visa and MasterCard.

When consumers shop on your site with rewards cards, it will cost you $.10 more on every one hundred dollars you process when you aren’t using authentication. ³

When you integrate Cardinal Centinel to enable Verified by Visa and MasterCard SecureCode, the card associations will charge you a lower interchange rate on VbV and SecureCode eCommerce transactions and more than offset Interchange creep. The combination of lower interchange plus the fraud protection of these programs gives the advantage to you the merchant.

By using Verified by Visa and MasterCard SecureCode, as well as alternative payments brands like PayPal, Google Checkout and Green Dot MoneyPak, which are generally less expensive to accept than credit cards, you can both avoid interchange creep and protect your online business with savings and security when transacting.

Use Cardinal Centinel, the Universal Merchant Platform, to implement Verified by Visa, MasterCard SecureCode, PayPal, Google Checkout and any other new payment brand you wish to accept.

AN INDUSTRY PERSPECTIVE

In 1971, BankAmericard established an “interchange fee” to be paid by the merchant's bank to the cardholder's bank. Initially, the fee was set at 1.95% per transaction. MasterCard quickly followed suit. The interchange fee was explained to merchants as compensation for the risks of card-issuing banks.⁴ Today many other variables make up the interchange fee for credit card transactions, including card type.

Jacques Breton, Executive Vice President, Business Development for Merchant Services Network and founding Director of the Northeast Acquirers' Association (NEAA) feels that interchange is one way card issuers force merchants to subsidize the issuing side of the industry. "The issuers are making the retailers pay for everything beyond and including the rewards programs," he said.⁵

Humboldt Merchant Services saw its percentage of rewards transactions grow at a rate from less than 2% in April 2005 to 13% in November 2006.⁶ This means that more than 10% of Humboldt orders were more expensive because of the higher interchange rates associated with rewards cards.

¹ Green Sheet 07:06:02
² Green Sheet 07:05:01
³ Visa – Select Interchange Rates: April 2007
⁴ Green Sheet 07:02:01
⁵ Green Sheet 07:03:02
⁶ Green Sheet 07:01:02

NetCash
NetCash, Powered by CardinalCommerce

How many times have safety concerns derailed potential shoppers from spending their money at your online store? [+/-] Read More

A global survey conducted by Visa in 2006 found that theft or loss of personal/financial information was the number 1 concern of consumers worldwide. Incredibly, this fear of fraud topped fears of both environmental degradation (no. 2) and terrorism (no. 3).

Therefore, how many times have safety concerns derailed potential shoppers from spending their money at your online store? A large number of consumers, especially ones of high net worth, simply don’t want to leave their sensitive information at a web store, while others simply desire anonymity. With NetCash, powered by CardinalCommerce, merchants can target the this market niche of consumers that will only buy once their security or privacy concerns are addressed.

NetCash is a payment brand specifically designed to get online sales from those consumers who are security conscious and desire anonymity. Through Cardinal Centinel, the Universal Merchant Platform, e-businesses can access NetCash, in addition to all of the most exciting payment brands in the marketplace through one fast, easy installation. If you are already a Cardinal Centinel Customer, the installation of the NetCash payment brand is even faster. Once Centinel is deployed on a website, merchants can enable additional solutions by simply giving us a call to activate the any of the payment brands we service.

Customers that use the NetCash payment method move quickly through checkout. Since users already have an established account, shopping with NetCash is a simple process.
By providing NetCash as a payment option, you can capture sales from those consumers who had previously feared transacting on the web.

With a consumer base of over one hundred thousand satisfied users and growing, consumers are finding NetCash a welcome alternative to other payment methods. NetCash even offers a distinctive “discreet billing” checkout process for the sale of physical goods in specific cases where discretion is important to the consumer.

With NetCash, powered by CardinalCommerce, merchants can provide their Customers with the safe, secure, and even anonymous online shopping experience that they want, and keep them coming back for more.

Interested in learning how you can provide your Customers a safe, secure and anonymous payment option? Call CardinalCommerce today at 877-352-8444 to find out how.

Partner Plug: Humboldt

It’s easy to see why over 16,000 clients trust Humboldt... [+/-] Read More

Headquartered in Eureka, California, Humboldt Merchant Services (HMS) sets a high standard for quality and integrity in the world of merchant services.

Since 2003, Humboldt has been a part of the First National family with a national merchant base processing in excess of $2 Billion Visa and MasterCard transactions per year.

Humboldt Merchant Services (HMS) is wholly owned and backed by First National Bank Holding Company. First National Bank is a premier, privately owned bank holding company that prides itself in the way they do business; always with “Midwestern values and work ethics.”

Humboldt was launched in 1993 to provide businesses throughout the United States with the highest quality, competitively-priced credit card processing. Today, Humboldt Merchant Services supports thousands of merchants, who accept Visa, MasterCard, American Express, Diner's Club, Discover, JCB, and debit cards.

CardinalCommerce partnered with HMS to offer the best method to enable the best eCommerce’s payment options. With Cardinal Centinel, Humboldt can give their entire merchant base access to Verified by Visa and MasterCard SecureCode, as well as alternative payment brands, through an all-in-one solution.

Humboldt’s merchants using Verified by Visa and MasterCard SecureCode have seen firsthand how the programs can significantly reduce costs and chargebacks, while simultaneously growing average ticket sizes. “We’re pleased to offer a CardinalCommerce’s specialized money-saving solution to our Internet merchants,” said Ken Musante, President of Humboldt Merchant Services.

HMS currently ranks among the top processors of Visa and MasterCard transactions in the nation, and it’s easy to see why over 16,000 clients trust Humboldt.

July Corporate Newsletter Correction

In our July Edition of “From The Nest”, we featured information from industry sources that led us to believe Visa fines Card Issuing Banks that do not offer Verified by Visa to cardholders. We have since learned this statement is not accurate.


_{*Cybersource 8th Annual Online Fraud Report}