by Rishabh kaushik | Feb 13, 2026 | Payment Gateway
Interchange fees are one of those behind-the-scenes costs that impact almost every card payment made today. Whether you’re a small business owner, an e-Commerce seller, or simply someone curious about how payment systems work, understanding them can help you manage expenses and make smarter financial decisions.
In this blog, we’ll break down what Interchange Fees are, why they exist, and most importantly, practical ways to lower them.
What are Interchange Fees?
These are charges paid between banks during a card transaction. When a customer uses a debit or credit card to make a purchase, the merchant’s bank (also called the acquiring bank) pays a fee to the customer’s bank (the issuing bank).
In simple terms:
- Customer pays with a card
- Merchant receives payment
- Merchant’s bank pays interchange to the customer’s bank
- Merchant ultimately covers the cost
These fees are usually included in the total processing fees a business pays for accepting card payments.
Why Do Interchange Fees Exist?
It plays a key role in keeping the Payment Gateway ecosystem running smoothly. They help cover:
- Fraud prevention and security measures
- Costs of issuing cards to consumers
- Reward programs like cashback and points
- Risk of non-payment or chargebacks
- Transaction handling and authorization
Without it, banks would have fewer incentives to provide credit card services or invest in payment security.
How Are Interchange Fees Calculated?
They are not fixed. They vary depending on several factors, such as:
1. Type of Card Used
Premium rewards cards often have higher interchange fees compared to basic debit cards.
2. Transaction Method
- In-person chip transactions usually cost less
- Online or keyed-in transactions cost more due to higher fraud risk
3. Business Industry
Some industries are considered higher risk and may have higher rates.
4. Transaction Size
Certain fees include both a percentage and a flat amount, such as:
- 1.8% + $0.10 per transaction
5. Card Network Rules
Visa, Mastercard, and other networks publish interchange rate tables that banks follow.
Why Interchange Fees Matter for Businesses
For merchants, interchange fees can significantly impact profit margins. Even small differences in rates add up over time.
Example:
If your business processes $100,000 per month in card sales, and interchange fees average 2%, you could be paying:
$2,000 per month
or
$24,000 per year
That’s money that could otherwise be invested in growth, staffing, or customer experience.
Ways to Lower Interchange Fees
The good news is that businesses can take steps to reduce costs. Here are some effective strategies:
1. Encourage Debit Card Payments
Debit cards generally have lower fees than credit cards, especially regulated debit cards.
You can encourage debit use by:
- Offering small discounts for debit payments
- Setting up signage at checkout
- Providing low-cost payment options
Even shifting a portion of transactions from credit to debit can reduce overall fees.
2. Use EMV Chip and Contactless Payments
Card-present transactions are typically cheaper than card-not-present ones because they are less risky.
Make sure your business accepts:
- Chip cards (EMV)
- Tap-to-pay contactless cards
- Mobile wallets like Apple Pay and Google Pay
These payment methods can lower fees and reduce fraud risk.
3. Optimize Your Payment Processing Setup
Not all processors price interchangeably the same way. Some offer:
- Flat-rate pricing
- Interchange-plus pricing
- Tiered pricing
Interchange-plus is often the most transparent and cost-effective for growing businesses.
Review your statements regularly to ensure you’re not overpaying.
4. Reduce Manual Keyed-In Transactions
Keyed-in payments (typing card numbers manually) are treated as higher risk and often come with higher rates.
To reduce this:
- Use card readers instead of manual entry
- Implement secure online checkout systems
- Encourage customers to use saved payment methods
5. Implement Address Verification and Security Tools
For online businesses, using fraud prevention tools can qualify you for lower interchange categories.
Helpful tools include:
- AVS (Address Verification System)
- CVV verification
- 3D Secure authentication
These reduce chargebacks and improve transaction approval rates.
6. Batch Transactions Correctly and On Time
Delaying settlement of transactions can increase fees. Payment networks may charge more if transactions are processed late.
Best practice:
- Close out your batch daily
- Avoid holding transactions for multiple days
Timely settlement helps keep rates lower.
7. Consider Surcharging or Cash Discount Programs (Where Legal)
Some businesses offset costs by:
- Adding a small surcharge for credit card use
- Offering discounts for cash payments
However, rules vary by country and card network, so compliance is essential before implementing these programs.
8. Work With a Payment Consultant or Specialist
If your business handles large volumes of card transactions, professional support can help uncover savings opportunities.
A specialist can:
- Audit processing statements
- Negotiate better rates
- Ensure proper transaction coding
- Recommend cost-saving payment strategies
Why Choose SelectivePay
SelectivePay is the ideal choice for businesses looking to reduce interchange fees and streamline their payment operations with ease. With advanced payment processing solutions, transparent pricing models, and secure transaction tools, it helps merchants optimize costs while ensuring smooth and reliable card acceptance. Whether you run a retail store or an e-Commerce business, it offers advanced support, fraud-prevention features, and expert guidance to improve approval rates and lower unnecessary processing expenses.
Final Thoughts
Interchange fees are a standard part of the card payment system, but they don’t have to be a burden. By understanding how they work and applying smart strategies, like encouraging e-Commerce payments, improving transaction security, and optimizing your processing setup, you can significantly reduce costs over time. Lower interchange fees mean higher margins, better cash flow, and more resources to grow your business.
by Rishabh kaushik | Feb 4, 2026 | Payment Gateway
In today’s digital world, credit card and debit card payments are the backbone of online and offline commerce. But processing these payments requires more than just a card reader; it demands ironclad security to protect sensitive cardholder data. The Payment Card Industry Data Security Standard, or PCI DSS, is useful in this situation. PCI DSS is a globally recognized standard. It defines security requirements for any organization that stores, processes, or transmits cardholder data. This includes card numbers, expiration dates, and security codes.
A payment gateway that is PCI-certified, i.e., a PCI-compliant Payment Gateway with 24/7 Customer Support. It ensures that every transaction you accept is handled in full compliance with these standards. These include firewalls, data encryption, and access controls. It also includes vulnerability management, monitoring, and regular audits.
For any business, especially small or growing businesses, using a PCI DSS-compliant payment gateway isn’t optional. It’s essential for protecting customer data, building trust, and avoiding liability.
Why Small Businesses Should Use PCI Compliant Gateways
If you run a small business and want to know How to Accept Credit Card Payments, use a PCI-compliant payment gateway. This solution is secure and suitable for small enterprises. This is one of the best ways to accept payments safely and professionally. Here’s why:
- Security and fraud prevention: The gateway encrypts card data during transmission. It anonymizes sensitive information. It also ensures that only authorized systems and people can access it. This dramatically reduces the risk of data breaches or fraudulent transactions.
- Regulatory compliance and risk mitigation: By complying with PCI DSS, you protect yourself from potential penalties. You also reduce legal exposure and prevent reputational loss. These are major concerns if you store or process card data without proper safeguards.
- Customer trust and brand credibility: When customers know their payment information is handled securely, they are more likely to trust your business. Customers tend to trust your business more. The environment should be certified. This trust is essential for repeat purchases and customer loyalty.
- Global scalability and flexibility: PCI DSS is a widely accepted standard. A compliant gateway allows you to accept payments from customers anywhere. You don’t need to worry about global compliance variations.
- Smooth, efficient payment processing: A PCI-compliant payment gateway is typically optimized for quick authorizations. It also provides streamlined checkout flows. This delivers a hassle-free payment experience for both merchants and customers.
The Added Value Features
If you’re exploring gateways like Selective Pay (or similar platforms), you can use features such as Selective Pay My Bill. You can also use a selective one-time payment. These features enhance flexibility and convenience for both merchants and customers.
- Selective Pay My Bill enables recurring customers to easily pay outstanding invoices or bills. For example, clients of a subscription or membership-based small business can do so via a secure gateway. This reduces friction, boosts timely payments, and enhances user experience.
- Selective One-time payment is ideal for one-off purchases or ad-hoc services. Customers who want to make a one-time payment aren’t forced into subscription models. They receive a simple, secure, and flexible checkout.
These features, when combined with PCI compliance, help small businesses to systematically scale payment collection. This applies to both recurring and one-time payments. They also ensure data security and compliance.
How to Accept Credit Card Payments for Small Business: Steps & Best Practices
If you are a small business owner ready to go digital, here’s a streamlined approach:
- Choose a PCI-compliant payment gateway: Choose a provider that meets all PCI DSS requirements and offers features that fit your business model (e.g., recurring billing, one-time payments, invoices).
- Integrate the payment gateway into your website or billing system: Many gateways provide hosted payment pages, SDKs, or plugins for e-commerce platforms. This helps offload sensitive payment data handling to the gateway rather than your own server.
- Enable features like “selective pay my bill” or “one-time payment,” depending on whether you bill customers recurrently or occasionally. This adds flexibility and improves the payment experience.
- Ensure ongoing compliance: PCI DSS compliance isn’t a “set and forget” affair. You need to maintain firewalls, encrypt data, update antivirus software, monitor access, and review security periodically.
- Communicate security to customers: Make it clear that you use a PCI-compliant gateway to handle payments securely. This approach can enhance trust, reduce cart abandonment, and boost conversions.
The Business Case: Why This Is the Best Way for Small Businesses to Accept Payments
Given the growing adoption of digital payments worldwide, small businesses can no longer rely on cash alone. Accepting card payments via a PCI-compliant gateway is often the best way to meet customer expectations. It helps businesses stay secure, compliant, and efficient.
- It reduces risk: Data breaches or payment fraud can cost far more in fines, lost business, or reputational damage. These costs are higher than what you invest in a proper gateway.
- It builds trust: customers feel safer, more willing to share card details, and more likely to transact regularly.
- It adds flexibility: you can support one-time payments, recurring billing, and invoicing, catering to a variety of business models.
- It scales easily: as your business grows, the same gateway infrastructure can handle more payments, international transactions, and expanded operations.
Conclusion
In essence, using a PCI-compliant payment gateway is not just a technical or compliance formality. It’s a strategic business decision. This is especially true for small businesses. If you care about customer security, trust, and smooth operations, choose a gateway that meets global standards like PCI DSS. It should also support flexible features like Selective Pay My Bill and Selective One-Time Payment. This is among the most reliable and systematic ways to accept credit card payments. By adopting such a solution, you can scale confidently. You can avoid legal or security pitfalls. Offer your customers a seamless payment experience. Focus on growing your core business.
