Credit Card Processing

Credit Card Processing Bait and Switch

by Ben Dwyer

Some credit card processors play the old bait-and-switch game of advertising rates that seem too good to be true.

Spotting these shysters is easier said than done because they will in fact honor the low rates they advertise. Processors that use bait-and-switch aren’t blatantly lying; instead, they’re tactfully omitting some important details. This type of credit card processing bait and switch can be costly for your business, but there are ways to avoid it.

Exposing rates that are too good to be true starts with an understanding of interchange. Interchange is a system of guidelines, rates and fees used by all credit card processors to determine the cost of transactions. Since it’s consistent among all processors, it’s helpful to think of interchange fees as the credit card processing industry’s equivalent to wholesale prices.

Interchange fees account for the bulk of credit card processing costs. No processor that wishes to remain profitable can offer a lower rate than the costs found on Visa and MasterCard’s interchange fee schedules. (Both of which are published online by the card brands.)

Find the Bottom, and Go from There

Visa and MasterCard publish a portion of their interchange fees online, making it pretty easy to see what the lowest rates really are. Below you’ll find two screenshots taken from Visa and MasterCard’s interchange fee schedules. Each image shows the rate that applies to a transaction involving a swiped consumer credit card. These two rates represent the lowest attainable credit card processing rates for the vast majority of businesses.

Visa Credit Interchange

MasterCard Credit Interchange

As you can see, the lowest Visa credit card rate is 1.51% plus a $0.10 credit card transaction fee, and the lowest MasterCard rate is 1.58% plus a $0.10 transaction fee.

What does the processor advertise?

Awhile back, I typed the term “credit card processing” into Google’s search bar, and then took screenshots of a few ads that appeared in the search results. We’re not too fond of bait-and-switch advertising here at CardFellow, but I blurred the names of these companies to protect the guilty.

Example of bait-and-switch #2

Example of bait-and-switch #3

Today, rates don’t show as prominently in ads on Google, but processors still advertise artificially low rates on their sites and in ads elsewhere.

How could processors realistically advertise rates of 1.05% when we’ve established that the lowest credit card rates charged by Visa and MasterCard are 1.51% and 1.58%, respectively? What these ads fail to mention is that the low advertised rate will only apply to debit card transactions that have a lower interchange fee. The advertised rate will not apply to credit card transactions.

The credit card processing bait and switch method lures you in with an artificially low rate that only applies to certain transactions, and then jacks up the cost on the majority of your transactions.

The Credit / Debit Switch

Visa and MasterCard have lower interchange fees for debit cards than they do for credit cards. As you can see from the following screenshots, Visa charges 0.05% plus $0.21 for Durbin regulated debit card transactions, and 0.95% plus $0.20 for unregulated transactions. MasterCard charges the same 0.05% plus $0.21 for regulated transactions, and 1.05% plus %0.15 for unregulated transactions.

Visa debit interchange

MasterCard debit interchange


Credit Card Processing Bait and Switch: How Processors Do It

Tiered pricing is a credit card processing pricing model that allows processors to set their own rates, and then route interchange categories however they choose. It’s what makes it possible for processors to advertise a rate that is too good to be true.

On a tiered pricing model, processors manipulate interchange fees behind the scenes. Instead of passing interchange fees to merchants, processors create their own set of tiered rates called qualified, mid-qualified, and non-qualified. They then pick and choose which interchange fees to place in each tier.

For example, this table shows what a typical bait-and-switch tiered pricing quote may look:

Pricing Tier Rate Transaction Fee Interchange Category
Qualified 1.05% $0.25 Swiped debit cards only
Mid-Qualified 1.95% $0.25 Keyed debit, consumer credit, reward credit, etc.
Non-Qualified 2.95% $0.25 Keyed credit, business credit, high value credit, etc.

By bundling interchange fees into generic pricing tiers, processor get can route transaction however they choose. They are able to advertise rates lower than what it actually costs to process a credit card transaction because the advertised rate will only apply to less expensive debit card transactions.

Technically, the processor does offer the low rate that they advertised – but only on a narrow subset of your transactions.

How to Avoid Credit Card Processing Bait and Switch

Tiered pricing is what makes bait-and-switch rates possible. Eliminating tiered pricing stops the problem at its source. Whether your business is currently accepting credit cards, or you’re shopping for credit card processing services, be sure to consider only those processors that offer interchange plus pricing.

Interchange plus is the only type of pricing that we allow processors to quote here at CardFellow. It has the potential to be relatively inexpensive, and is far more transparent than tiered pricing.

Bait-and-Switch is Everywhere

While looking for examples of bait-and-switch rates, I noted few popular websites that allow processors to advertise in that manner. These examples serve as a reminder: Be wary of any advertised rates, even if they’re published on a website that you trust.

TopTenREVIEWS has also posted static “comparison” tables of vague rates and fees that processors charge. Note that TopTenREVIEWS may have affiliateships with companies it promotes. I’m not quite sure what to make of the rates they advertise. It almost looks like a weird combination of interchange plus and tiered rates.



To avoid bait-and-switch tactics when searching for the right credit card processor, use CardFellow’s free quote comparison tool. You’ll see accurate, fully-disclosed costs (no teaser rates!) and your rates are locked for life. Best of all, it’s free to use. Try it now! 

2 thoughts on “Credit Card Processing Bait and Switch”

  1. A couple things should be made clear; processors see none of the interchange that all goes to the banks. The processors/ISOs get only what is above that. Additionally the average ISO makes about 25 basis points (0.25%) above interchange with interchange plus. On an account processing $10,000/month, the processor makes only $25.00! Don’t expect wonderful service, etc. when margins are that slim. Don’t deal with “1.05%” scam artists, but don’t nickel and dime your processor. Expect to get good service for a decent profit margin, like with any business.

    1. Hi Richard,

      You’re absolutely correct that merchant services providers do not see income from interchange fees (paid to issuing banks), or from assessments paid to the card brands (Visa, MasterCard, Discover).

      CardFellow requires processors to quote exclusively interchange plus pricing, and our platform operates in such a way that processors offer the best rates first. Even new low volume businesses can expect quotes that are more competitive than the 25 basis points you’ve indicated.

      Not only do we expect the processors in our marketplace to provide exceptional ongoing service along with competitive pricing – CardFellow guarantees it. CardFellow provides free statement monitoring and audits for life.

      Regarding the profit margin – CardFellow does not charge processors upfront costs to join our marketplace or to place quotes, and the commission processors pay CardFellow is a fraction of the industry standard. The result is that our processing partners are able to offer far more competitive rates and fees through CardFellow than anywhere else.

      CardFellow’s goal is to ensure businesses receive only the most competitive, honest pricing matched with unparallel service.

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