If you are a business owner, you want to be able to accept credit cards for payment. In this day and age, credit card transactions are a way of life. If you are unable to accept credit cards, there is a good chance that you will lose a lot of business.

Accepting credit cards for payment involves various steps.

The first step is setting up a merchant account. The merchant account allows you to accept credit cards. This is different from the account that the cardholder sets up. Essentially, the cardholder establishes a line of credit with the issuing bank so they can make purchases. You, as the merchant, establish a merchant account with the acquiring bank so you can accept credit cards.

The interchange is a part of all credit card transactions. The interchange is a percentage of the transaction that the acquiring bank (the bank on your end) pays to the issuing bank (the bank on the cardholder’s end). Basically, the cardholder’s bank charges the acquiring bank to process the credit card transaction. Interchange pass through is a term used to describe the pricing on the merchant account.

The reason the interchange is important to you, as a merchant, is because you want to pay the lowest price possible for credit card transactions. You want the rates you pay to be as close to the interchange as possible. Paying interchange pass through fees means that a small percentage is added to the interchange rate for every transaction that you process. Essentially, you will pay the interchange rate (the lowest rate available), along with a small percentage that goes to your merchant service provider.

As confusing as that might sound, as a merchant, your goal should be to process credit card transactions as close to the interchange pass through pricing. This is the lowest rate you can pay and it is also the most difficult rate to get. As a business owner, you may have to pay higher rates until you have an established business that can guarantee a certain amount of transactions every month. Be patient and do not be afraid to ask for the interchange pass through rate. It is well worth the money you will save.

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