Reducing interchange expenses is crucial for merchants to maximize their profits when processing credit card transactions. Here are some effective strategies:

  • Swipe Cards in Face-to-Face Transactions: Whenever possible, swipe cards instead of hand-keying the card number in a face-to-face environment. Swiping is considered more secure and less prone to error, thus reducing the likelihood of additional fees.
  • Utilize Address Verification Service (AVS): Implementing AVS, which involves confirming the cardholder's zip code, not only reduces processing fees but also adds a layer of protection against accepting stolen credit cards. This practice helps verify the authenticity of the transaction.
  • Prompt Transaction Settlement: Ensure that you settle or close your transaction batch on the same day the authorizations occur. Delayed settlements can lead to increased fees and higher interchange rates.

Understanding Transaction Downgrading

Downgrading occurs when transactions fail to meet certain interchange criteria, resulting in higher costs for the merchant. Key reasons for downgrading include:

  • Incorrect Card Information Capture: If the card information is not accurately captured at the point of sale, it can trigger a downgrade.
  • Delayed Transaction Settlement: Transactions settled after the deadline (typically 24 – 48 hours post-authorization) are subject to downgrading.
  • Key-Entering vs. Swiping: Key-entering card details rather than swiping (or using a chip reader, if available) often leads to a downgrade due to increased security risks.

Additional Strategies to Prevent Downgrading

  • Use Updated Equipment: Employ up-to-date card reading technology, including chip readers, which are more secure than magnetic stripe readers.
  • Educate Staff: Train your staff on the correct procedures for card transactions to avoid errors leading to downgrades.
  • Regularly Review Transactions: Monitor your transactions for patterns that might indicate causes of downgrading, and address these issues promptly.
  • Maintain PCI Compliance: Adhering to PCI (Payment Card Industry) standards is crucial in minimizing risks associated with card processing, including downgrades.


By implementing these strategies, merchants can significantly reduce interchange expenses and avoid the additional costs associated with downgraded transactions. Regular review and adaptation of these practices will ensure continued efficiency and cost-effectiveness in credit card processing.


Article ID: 36000106356