The combination of cards you accept on any given month is called your “Card Mix”. This monthly combination will always be different, but let’s assume for a minute that you accept 1000 transactions with a total sales amount of $40,000 one month, and 1000 transactions with a total sales amount of $40,000 the next. In this case your “Effective Rate” should be exactly the same, right?
Wrong, but why?
It doesn’t make common sense. Your transactions and sales are EXACTLY the same from one month to the next. Here’s why. As I covered in the Interchange Fee section, Visa, MasterCard, Discover, and American Express have hundreds of different card types, each with their own individual fixed rates. You mean a Visa isn’t just a Visa and a Mastercard isn’t just a Mastercard, that’s exactly what I mean. Let’s use this example.
As part of your Card Mix in July you accept:
July
50 MC World Elite transactions
$5,000 in total sales on this type of card
2.50% + 0.10 cents = Per transaction Interchange Fees for MC World Elite cards
$130 = Total Interchange Fees for MC World Elite cards in July
100 VI-US CPS/Small Ticket transactions
$5,000 in total sales on this type of card.
1.60% + 0.05 cents = Per transactions Interchange Fee for VI-US CPS/Small Ticket cards
$85 = Total Interchange Fees for VI-US CPS/Small Ticket cards
Total July Fees on these cards = $215
Now in August lets flip the number of transactions on each type of card but leave the total sales amount the same and see what happens.
August
100 MC World Elite transactions
$5,000 in total sales on this type of card
2.50% + 0.10 cents = Per transaction Interchange Fees for MC World Elite cards
$135 = Total Interchange Fees for MC World Elite cards in Aug
50 VI-US CPS/Small Ticket transactions
$5,000 in total sales on this type of card.
1.60% + 0.05 cents = Per transactions Interchange Fee for VI-US CPS/Small Ticket cards
$82.50 = Total Interchange Fees for VI-US CPS/Small Ticket cards
Total Aug Fees on these cards = $212.50
As you can see, just changing how many cards of a certain type were accepted caused the Interchange Fees for the month of Aug would be $2.50 higher than in July. Now take this process and repeat it over hundreds of different card types, including debit cards, and you can see why total Interchange Fess and Effective Rates will never be the same.