Every time a credit card is swiped, tapped, or entered an interchange fee is charged. It’s the fee the acquiring bank pays to the cardholder’s issuing bank for authorizing the transaction.
What Are Interchange Fees?
Most people think interchange is a single number. It’s not.
When your processor quotes you “2.5% per transaction,” that’s an average. The actual rate on any given transaction is pulled from an interchange table — a rate sheet set by Visa and Mastercard that changes based on dozens of variables.
Your processor doesn’t always show you this table. That’s a problem.
Read about Payment Gateways vs Payment Processors →
What Controls the Interchange Rate?
The interchange rate on a single transaction can shift based on:
- The product being purchased. Buying water at a convenience store and buying alcohol at the same store can carry different interchange rates. Visa and Mastercard classify transactions by merchant category, and some categories are considered higher risk.
- Where the transaction happens. A store in a high-fraud zip code pays a different rate than one in a low-risk area. Location affects fraud risk, and fraud risk affects interchange.
- How the card is used. This is the big one. Card present transactions, where the physical card is swiped, tapped, or dipped, carry lower rates than card not present transactions, where a number is typed in or on file. The difference can be 0.2% to 0.3% per transaction.
- The card itself. Business cards, government purchasing cards, and rewards cards all carry different interchange rates. A corporate Visa and a consumer Visa hit different lines on the interchange table.
Card Present vs Card Not Present: Why the Gap Exists
Card present transactions are lower risk. The physical card is there. The chip or tap confirms the cardholder. Fraud is harder to pull off.
Card not present transactions carry more risk by definition. Someone typing a card number online or giving it over the phone — the processor has no way to verify the physical card exists in front of a real person. Higher risk means higher interchange.
The rate difference is typically around 0.3%. That sounds small. It isn’t, not at scale.
A Caterpillar equipment dealer renting backhoes at $1,000 a day processes a lot of high-value transactions. If they’re running those as card not present when they could be swiping, that 0.3% adds up fast. A $2 billion retailer with 70% of revenue on credit cards — the difference between 2.3% and 2.5% on $1.4 billion in card transactions is millions of dollars.
This is why card present capability matters even for companies that don’t think of themselves as retailers.
When Card Present Matters for D365 Implementations
Card present isn’t just a retail problem. It shows up in scenarios where the cost difference is easy to miss until someone does the math.
Equipment rental and heavy industry. CAT dealers, rental companies, and industrial distributors process high-value transactions. Physical card swipe = lower interchange. If card present isn’t set up, every transaction is paying the card not present premium, even when the customer is standing right there.
Last-mile delivery. A driver delivers product and the customer wants to add more on the spot. The sales order exists in D365 back office. But how do you take payment right now, at the door? That’s a card present scenario, and it needs a swiper, not a phone number on file.
“True B2B” companies that aren’t actually true B2B. A company that says “we only do credit cards in the back office” still occasionally needs to take a card in person. A customer walks in. A rep picks up the phone. Someone needs to swipe. If the infrastructure isn’t there, you’re processing card not present and paying the premium, or worse, reading card numbers out loud, which isn’t PCI compliant.
Interchange Plus vs Flat Rate: Which Pricing Model Fits?
Most small businesses start on flat-rate pricing — a single percentage per transaction regardless of card type. It’s simple. It’s predictable. It’s also usually more expensive if you’re processing volume.
Interchange plus pricing passes the actual interchange cost through to you, then adds a markup. You see exactly what each transaction costs. It’s more complex, but it’s cheaper at scale and it’s where interchange optimization actually happens.
If you’re evaluating payment processors for a D365 project, the pricing model matters as much as the processor itself. Flat-rate pricing is simple but costs more at volume. Interchange plus is where the real optimization happens, and it’s the model worth demanding if your transaction volume is significant.
Read more about interchange pricing models →
What This Means for Your D365 Implementation
Interchange fees are set by Visa and Mastercard, not your processor. But your processor controls how much visibility you get into them, and whether you’re on a pricing model that lets you optimize them.
Before you finalize a payment processor for your D365 project, these questions are worth asking:
- Are we on interchange plus or flat rate? And do we understand the difference in what we’d actually pay?
- Do we have card present capability where we need it? Not just in retail POS, but back office, warehouse, and field scenarios too.
- Does our processor show us the interchange table? If not, you’re flying blind on one of your largest recurring costs.
These aren’t questions most people think to ask until after contracts are signed. By then, you’re locked into pricing you haven’t fully evaluated.
The Pathfynder Approach to Payment Solutions
Pathfynder evaluates payment requirements before a processor is selected not after.
That means looking at transaction patterns, card present vs card not present ratios, interchange optimization opportunities, and which pricing model actually fits the business.
The goal: payment infrastructure that matches how money actually moves in your organization — not just what your processor’s sales team recommended.
Evaluating payment options for your D365 implementation?
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