Interchange

When a customer pays by card, the money is reduced before it reaches the merchant. The deduction has three layers: interchange, which goes to the bank that issued the customer's card; network assessments, which go to Visa, Mastercard and the rest; and the acquirer or processor's markup, which is the only genuinely negotiable piece.

Interchange varies by card type, by how the transaction was accepted, and by merchant category. A rewards credit card keyed in manually costs more than a debit card dipped at a terminal. Debit interchange for larger issuers is capped by federal regulation; credit interchange is not.

Why it matters in funding

Card-split merchant cash advances take a holdback from settlements, and the interaction between the two decides what the merchant actually keeps.

• If the split is applied to gross sales, the merchant pays processing costs out of the reduced remainder
• If applied to net settlement, processing has already been deducted and the split is smaller in dollar terms

The agreement specifies which, and the difference across a multi-month advance is material. It is also the reason a merchant reconciling a statement can find that the same 12% split produced different net proceeds in two months with identical sales — the card mix changed.

Pricing models

Interchange-plus quotes the actual interchange plus a stated markup, so the merchant can see the components. Tiered and flat-rate pricing bundle everything into one number, which is simpler and generally more expensive.