Interchange Fees

Mastercard Standard Interchange Downgrade

by Ben Dwyer

An interchange “downgrade” happens when a credit card transaction doesn’t meet requirements for a preferred interchange category.

Every time you accept a credit card at your business, you’re charged a fee. Part of that fee comes from interchange, but there are hundreds of interchange categories. Each transaction has a “target” interchange category (and associated cost) that a transaction should qualify for if basic requirements are met. However, if those requirements aren’t met the transaction can downgrade to a more expensive interchange category. Essentially, downgrades function as a sort of penalty category.

This article looks at Mastercard “standard” downgrade categories. It’s helpful to have a solid understanding of how interchange fees work before diving into individual interchange articles like this one.

Mastercard Standard Interchange Category

Mastercard uses the term “standard” for most of its downgrade interchange categories. Standard applies to consumer credit, debit, and prepaid cards as well as to many commercial cards. It functions as a “catch-all” category for any transaction that didn’t meet the requirements of another, lower cost interchange category.

Standard Interchange Rates

Mastercard sets the Standard interchange rates, which vary by card type. The current rates are as follows, direct from Mastercard’s website.

Consumer Credit Standard Interchange Rates

For consumer credit cards, Mastercard has categories for both “rewards” and “non-rewards” cards. However, only the most premium rewards cards have higher rates. Below are the current Standard fees for credit.

Volume Rate Per-Transaction Fee
Standard 2.95% $0.10
Standard – Enhanced 2.95% $0.10
Standard – World 2.95% $0.10
Standard – World High Value 3.25% $0.10
Standard – World Elite 3.25% $0.10

Pricing subject to change at Mastercard’s discretion.

The first row (“Standard”) refers to non-rewards cards. All other rows are for rewards credit cards.

Debit and Prepaid Standard Interchange Rates

While sometimes debit and prepaid cards have different rates, they’re the same when it comes to Mastercard Standard. Currently the rate is as follows.

Volume Rate Per-Transaction Fee
Debit Standard 1.90% $0.25
Prepaid Standard 1.90% $0.25

Note that this debit rate only applies to “unregulated” debit cards; that is, debit cards issued by banks with less than $10 billion in assets. Regulated debit cards are capped at interchange.

Commercial Standard Interchange Rates

Transactions with commercial cards qualify for different interchange categories than consumer cards. There are 5 “levels” of Standard commercial interchange, dependent on the cardholder spend level, as follows.

Volume Rate Per-Transaction Fee
Level 1 2.95% $0.10
Level 2 3.10% $0.10
Level 3 3.15% $0.10
Level 4 3.25% $0.10
Level 5 3.30% $0.10

“Level” is determined by the cardholder’s spend. The current thresholds are:

  • Level 1: up to $24,999.99
  • Level 2: $25,000 – $49,999.99
  • Level 3: $50,000 – $99,999.99
  • Level 4: $100,000 – $249,999.99
  • Level 5: $250,000 and up

Note that the rates in these tables are not the final cost you’ll pay for the transaction. Processors add fees (called markup) on top of the base (wholesale) interchange rates.

Standard Interchange Criteria

Most interchange categories have requirements a transaction must meet to qualify for that category. In the case of Standard, it essentially functions the other way – if a transaction doesn’t meet other categories’ requirements, it will fall to Standard.

Common reasons that a transaction may downgrade to Standard include:

  • Not providing electronic authorization
  • Not settling in the required timeframe

However, other factors may also cause a transaction to drop to standard.

Are downgrades bad?

A few downgrades now and then isn’t cause for concern. It’s impossible to eliminate them completely. However, if you’re seeing a lot of “Standard” on your statement, it’s a good idea to investigate. Downgrades by definition cost more than other interchange categories, so the more of them you have, the more money you’re losing unnecessarily.

Statement Abbreviations

Different processors have different names or abbreviations for interchange categories. However, there are some common ways you may see Mastercard Standard categories listed on processing statements. That includes:

  • STANDARD (Standard)
  • ENH STND (Enhanced Standard)
  • STND BUS (Standard Business)
  • MCW STND (Mastercard World Standard)
  • MWE STND (Mastercard World Elite Standard)
  • HV STND (High Value Standard)
  • MC STND D (Mastercard Standard Debit)
  • STANDARD PP (Standard Prepaid)

However, this list is not exhaustive. Your processor can choose other names to label Standard interchange.

Keep in mind that some processors (notably those that offer “flat rate” style processing) don’t provide interchange detail. That means you won’t be able to see what interchange categories applied to your transactions on a monthly processing statement. You will have no way of knowing if transactions “downgraded.”

Mastercard Interchange Downgrade Fee

In addition to the higher cost of interchange that results from a downgrade, Mastercard also imposes an “interchange downgrade fee” of $0.15 per downgraded transaction.

You may have seen a notice about this fee on your July 2019 merchant statement. The notice read:

“Effective July 15, 2019, Mastercard introduced an Interchange Downgrade fee of $0.15 to be assessed on transactions for which the interchange has been reclassified. This new fee is designed to promote accurate interchange information and will be reflected as “MC Interchange Downgrade Fee” on your merchant statement. This fee will only apply if transactions have been reclassified during interchange assessment.”

If you have legitimate interchange downgrades, you’ll see the interchange downgrade fee. Keep in mind that processors in the open market are not required to pass fees to you at the cost set by Mastercard. Your processor may charge more. However, if you chose your processor through CardFellow, you’re protected by our legal agreement requiring processors to pass interchange and assessments to you at cost.

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