When processing credit card transactions, merchants have to pay an interchange rate, which is a certain percentage of the transaction volume plus an additional fee. Several factors can affect your interchange rate, and some merchants can take advantage of special interchange rates.
Today, we’re going to cover two types of businesses that enjoy special, lower interchange rates: supermarkets and non-profit organizations.
Supermarket Interchange Rates: What You Need to Know
Supermarkets and grocery stores generally receive lower interchange rates. Sales at supermarkets and grocery stores are rarely disputed, so these merchants often enjoy heavily discounted interchange rates.
The higher the volume, the lower the rate.
It’s important to understand which merchants qualify for these lower rates and the rates for Visa and Mastercard transactions. Only stores with the correct MCC can qualify for the lower rate. Other requirements must also be met, and these are set by the card networks themselves.
Qualifications for Supermarket Visa Interchange Rates
- Only grocery stores and supermarkets can qualify for these special rates (MCC 5411)
- Obtain and pass a valid electronic authorization
- Authorize and settle within one day
- Authorization and settlement amounts must match when processing non-PIN debit transactions
- The transaction must be run through a credit card processing machine (swiped magstripe payments, contactless, chip card readers, etc.)
What about Mastercard? The requirements are mostly the same. However, Mastercard does allow some leeway with settlement and authorization amounts. For example, supermarkets can settle within 10% of the authorized amount.
CPS Supermarket Interchange Rates for Visa Transactions
According to Visa’s interchange schedule, CPS supermarket rates are as follows:
- CPS Supermarket: 1.22% volume; $0.05/transaction
- Threshold 1: 1.15% volume; $0.05/transaction
- Threshold 2: 1.20% volume; $0.05/transaction
- Threshold 3: 1.22% volume; $0.05/transaction
- CPS Supermarket Debit Reg: 0.05% volume; $0.22/transaction
- CPS Supermarket Debit: 0% volume; $0.30/transaction
- CPS Supermarket Prepaid: 1.15% volume; $0.15/transaction
Some cards will have different rates. When transactions don’t meet the above requirements, they may be downgraded to a more expensive category.
Thresholds 1, 2 and 3
Thresholds 1, 2, and 3 typically apply to large supermarkets. Of course, it depends on your transaction volume and totals.
To qualify for the lowest threshold (3), you must do at least 15.2 million Visa transactions per year and have a minimum volume of $840 million. Thresholds 1, 2, and 3 must also be PCI compliant and have fewer than 0.2% disputes.
- Threshold 3: $840+ million in volume; 15.2+ million total transactions
- Threshold 2: $3.31+ billion in volume; 58.2 million in total transactions
- Threshold 1: $5.82+ billion in volume; 95.5 million in total transactions
Debit Categories
To qualify for a CPS Supermarket debit category, the transaction must meet the following requirements:
- It must be a Visa debit card
- The transaction must be authorized by the customer’s signature
- Settlement and authorization amounts must match
PIN-authorized transactions do not qualify for debit rates. In this case, PIN debit network fees will apply.
There are two categories of debit cards: regulated and unregulated. Regulated debit cards are issued by banks that have at least $10 billion in assets. Fees for regulated debit cards are capped, and merchants enjoy a lower rate when customers use them.
Supermarket Interchange Rates for Mastercard Transactions
Mastercard’s interchange rates for supermarkets and grocery stores are as follows:
- Supermarket Core: 1.48% volume; $0.10/transaction
- Enhanced Supermarket: 1.48% volume; $0.10/transaction
- World Supermarket: 1.58% volume; $0.10/transaction
- World Elite Supermarket: 1.90% volume; $0.10/transaction
- Supermarket Debit: 1.05% volume; $0.15/transaction
- Supermarket Prepaid: 1.05% volume; $0.15/transaction
- Regulated Debit: 0.05% volume; $0.22/transaction
It’s important to note that these are the base rates for supermarkets. Like Visa, Mastercard also has different tiers for supermarket interchange rates. To qualify for Tier 3 (the lowest tier), the supermarket must meet the threshold of $750 million per year.
Supermarket Tiers 1 and 2
- Core and Enhanced: 1.15% volume; $0.05/transaction
- World, World High, and World Elite: 1.25% volume; $0.05/transaction
Supermarket Tier 3
- Core and Enhanced: 1.22% volume; $0.05/transaction
- World, World High, and World Elite: 1.32% volume; $0.05/transaction
If transactions don’t meet the qualifications for a discounted interchange rate, they will be downgraded to a more expensive rate.
Special Interchange Rates for Non-Profits: What You Need to Know
For non-profits and charities, interchange fees can quickly eat into their donations, which are the primary source of income for the organization.
Visa Consumer Credit Card Interchange Rate Program
Implemented in 2011, this program allows organizations with the MCC 8398 designation to take advantage of lower interchange rates.
For this program, the interchange rates are as follows:
- CPS Charity: 1.35% volume; $0.05/transaction
- CPS Retail 2 CNP Debit: 0.65% volume; $0.15/transaction ($2 cap)
- Regulated Debit: 0.05% volume; $0.22/transaction
Non-profits and charities must meet the same requirements as the CPS Retail 2 program:
- Transactions must be settled within one day.
- The transaction must be from an MCC 8398 organization.
- The transaction can be key-entered or swiped.
Mastercard Interchange Rates for Non-Profits and Charities
Mastercard has similar requirements for their non-profit interchange rate program:
- Only MC 8398 organizations are eligible. These rates do not apply to associations, schools, churches or other non-profits.
- Transactions must be settled within two days of authorization.
- Pass 1 valid electronic authorization.
- Contactless, magnetic stripe, chip data read, or manual key-entered.
Mastercard’s discounted rates for non-profits are as follows:
- Charity Core: 2% volume; $0.10/transaction
- Enhanced Charity: 2% volume; $0.10/transaction
- World Charity: 2% volume; $0.10/transaction
- World Elite Charity: 2.20% volume; $0.10/transaction
- Charity Debit: 1.45% volume; $0.15/transaction
- Charity Prepaid: 1.45% volume; $0.15/transaction
- Regulated Debit: 0.05% volume; $0.22/transaction
When transactions don’t meet the requirements for any of the categories above, they will be downgraded to Standard rates, which are 2.95% plus $0.10 per transaction.
The Bottom Line
Some types of businesses can take advantage of special interchange rates. Supermarkets and charities (non-profits) are two examples. Grocery stores and supermarkets enjoy lower rates because their transactions are rarely disputed. Charities receive heavily discounted rates to ensure that more of their donation funds are put towards their core operations.
While these lower rates are available to qualifying organizations, each transaction must still meet specific requirements, or else they will be downgraded to a more expensive rate.
