The cost of accepting card payments is driven primarily by interchange, which is set by card associations like Visa®, MasterCard®, Discover® Network and UnionPay. They charge interchange fees to offset the costs associated with the card payments network. Interchange fees are evaluated quarterly based on an analysis of industry costs and economic conditions. Although interchange fees are applied to all credit card processors equally, they fluctuate in amount based on a variety of factors.
The interchange rate you pay can be affected by factors you can control as well as those outside of your control. For example, you can't control the type of card presented or whether the cardholder earns miles or rewards for using the card, but you can control the way your account is configured, how the transaction data is entered into the terminal, and the time of settlement versus time of authorization.
You must make sure your payment operations are set up to help your transactions qualify at favorable rates. Card Associations quote the lowest rate for a transaction, assuming that a number of requirements (which vary according to the card type, the type of business accepting the card payment, and the transaction channel) are met. If one or more of these requirements are not met, the transaction is categorized at a more expensive interchange level. This is referred to as a "downgrade."