Q1.What is changing?

The European Commission has made changes to card processing practices to create a common market across the EU and European Economic Area (EEA) states. One requirement of the new Interchange Fee Regulation (IFR) is that PayPal and other payment providers must offer an unblended fee structure for card payments. This is why we have introduced Interchange Plus, a different fee structure for receiving debit and credit card payments through PayPal Website Payments Pro, PayPal HereTM and Virtual Terminal. Previously, PayPal only offered a blended fee structure.

You can choose this new fee structure by contacting us.

Q2.What is a blended fee structure?

A blended fee structure has two components – a set percentage plus a fixed fee on each transaction, or a flat percentage fee for PayPal Here. You pay the same rate regardless of the card type, with PayPal absorbing any fluctuations in the actual costs charged by banks. For example, you might be charged 3.4% + 20p for all transactions. You receive the money in your PayPal account as soon as your customer makes the purchase, and that money is usually available immediately for withdrawal.

The blended fee structure may be preferred if:
  • Immediate availability of funds on all your transactions is important
  • Predictable transaction costs are essential for planning
  • Quick and simple reconciliation of PayPal and card sales is favoured

Q3.What is the Interchange Plus fee structure?

The Interchange Plus fee structure has three components – interchange fees (set by MasterCard and Visa), a set percentage, plus a fixed fee on each transaction. Interchange Plus rates apply only to transactions in which your customer has paid with a debit or credit card (either in person through PayPal Here, on your website, or through PayPal Virtual Terminal). Interchange fees may vary depending on the country of issue, category and type of card used to make the payment. For example, you might be charged an interchange fee (which ranges from approximately 0.2% to 2.0%) + 2.9% + 20p. PayPal doesn’t know what the interchange fee is at the time of the transaction, and only receives interchange fee information from processors at the end of the business day. You usually receive the money in your PayPal account the next working day after the payment has been made.

The Interchange Plus fee structure may be preferred if:
  • The vast majority of your sales are from consumer card types within the UK or the EEA for which interchange fees are capped
  • Delay of one to two working days to the availability of your debit and credit card funds is acceptable
  • Differing settlement times between card sales and PayPal sales do not impact reconciliation

Q4.What are interchange fees?

Interchange fees are the fees set by the card schemes (Visa and MasterCard) and paid to card issuers for all transactions. These fees vary by card type, and the relative location of the card issuer and the merchant.

Q5.How much is the interchange fee?

Interchange fees will vary depending on the type of card used and country of issue. Interchange fees vary approximately from 0.2% to 2.0% per transaction.

Q6.What are the other fees are included in the fees I pay to PayPal?

The interchange fee is only part of the fees incurred when processing and accepting card transactions. In simple terms, it is the fee that merchant banks pay to process debit and credit cards, not the fee they charge merchants, which is usually higher.
In addition to interchange, there are also scheme and assessment fees, levied and retained by the card schemes, as well as other fees paid to our processing partners.

Q7.Why are these fees not the same for all card types and currencies?

Interchange and other processing fees can vary across card types and regions. This means that interchange fees, as a proportion of a merchant’s total charges, may also vary depending on the profile of the merchant’s transaction volume. A blended fee structure provides clarity for merchants, regardless of the underlying complexity of the cards that customers use, which makes it easy for merchants to plan and reconcile charges.

Q8.Will the Interchange Plus fee structure be cheaper for my business?

Interchange is one component of the cost of processing debit and credit card transactions, and it varies greatly between card type and country of issue. Many card types are not capped, and therefore you may not see a reduction in the cost of card processing. In other cases, we may see a reduction in the cost of processing for a merchant, although this is dependent on your individual business and circumstances.

Q9.Does this impact my transactions that are paid with PayPal?

No, standard PayPal transactions are not eligible for Interchange Plus pricing.

Q10.Which debit and credit cards does the Interchange Fee Regulation cover?

The Interchange Fee Regulation (IFR) covers all Visa and MasterCard consumer card types. This includes debit, prepaid and credit cards in all 28 European Union member states plus Iceland, Lichtenstein and Norway.

If you would like to discuss switching to Interchange Plus, please contact our customer support team.

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