The Ins and Outs of Interchange


What you don’t know can cost you, writes Marci Gagnon, vice president of strategic alliances for Qualpay, a provider of processing solutions to fuel delivery and service businesses:

With the warm weather upon us, most customers think fuel marketers have closed up shop for the summer. In reality, this is when the energy industry gets down to business. There is equipment to repair, software to upgrade and offices to organize. It’s also the time of year to closely review commercials, including credit card acceptance rates.

Marci Gagnon

Here are three tips to ensure the best rates on payment acceptance.

Make sure your company is set up correctly with each card brand. MasterCard and Discover classify fuel marketers as “utility.” Visa classifies fuel marketers as “emerging market.”

This reduces the cost of accepting these card types at the card brand level and it also reduces what you pay. To qualify for these lower rates, you have to be set up properly as a fuel marketer. Make sure that the company you’re working with can pass both codes (Utility and Emerging) so that you can achieve the best rates across all card brands. Many fuel marketers are surprised to find out that AMEX also offers a “Services” rate. While it is still a little more expensive than the other brands, it’s much cheaper than their standard rate.


Be sure you have access to updated payment technology. Each type of card that your business accepts has a price set by the card brands, also known as Interchange. Visa and MasterCard, combined, have roughly 30 Interchange categories that affect fuel marketers. And with the variance in card acceptance, business classification and platforms, Interchange cost can fall into over 500 buckets (yup, pretty crazy).

The card brands associate a cost bucket on each payment card your company accepts. The least expensive rate for each card type is referred to as Target Interchange and is the best possible rate you can achieve. But there’s a catch. To achieve Target Interchange everything must be just right. You have to be set up properly, following all card brand rules, with necessary data (by card type) passing through–whether that be a simple CVV, or more complex data such as tax rate or customer ID. This might seem easy, but with 500 buckets, each requiring different bits of data, updated technology plays a major role.

If your technology is outdated, you will be unable to pass along certain qualifying criteria with your payment transactions. The most common payment gateways in our industry were created in the early 2000s and were developed for generic business types, not for the way fuel marketers run their business. Since the data exchange happens at the gateway level if the gateway can not pass the necessary data the card brands have no option but to place the transaction in a more expensive bucket. When Target Interchange is missed, it is referred to as a downgrade. The result is that fuel marketers end up paying more than they would if the qualifying data had been passed correctly, in some cases up to .75%.

In addition, some of the most popular card types today were not around 20 years ago so the capability to pass the qualifying data for Target Interchange was never included in products built prior to the introduction of these card types.

This is important because 90% of the cost on your processing statement is made up of Interchange (those 500 buckets) with only about 10% of the cost being attributed to the credit card processor’s expense and profit. In most cases a misclassification in the Interchange buckets costs fuel marketers more than the savings from the price offered by your processor.

Negotiate basis points. Focus on the processor’s proposal. Basis points, monthly fees and expenses make up the last 10% of the statement. Since all processors have the same Interchange costs this should be the easiest thing to negotiate. Review the basis points (the markup on the Interchange). They should be a fair assessment based on the size of your business and risk associated. Review the proposal for fees such as “club,” “portal,” or “security” (outside of PCI). These could be hidden costs that add up quickly on a monthly basis. And review your gateway statement. Sometimes that is a separate bill. Savings at the gateway level could save you five or 10 cents per transaction.

This step might seem like the first thing to worry about, but it’s not. Remember, Interchange dwarfs processor expense. Once you’ve solved for Target Interchange, you have guaranteed that 90% of fees are passing correctly.

Marci Gagnon ( is vice president of strategic alliances for Qualpay, which provides processing solutions to fuel delivery and service businesses. Visit Qualpay at


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