Why rewards and premium cards cost more to accept
Ever notice two $50 sales on the same day with different processing fees? One might have been a basic debit card. The other might have been a premium rewards credit card. Rewards cards cost more to accept because the issuing bank charges higher interchange on them, and that money helps pay for the points, miles, and perks the cardholder earns.
You didn't sign up for the customer's rewards program. But you do help fund it. Here's how that works.
Where do rewards actually come from?
When a customer earns points on a purchase at your store, someone pays for those points. Part of it comes from the card's annual fee and interest the cardholder pays. A meaningful part comes from interchange, the fee the customer's bank collects on each transaction.
Interchange fees are set by the card networks in large tables. Each card type has its own rate. Basic debit sits near the bottom. Standard credit sits higher. Premium rewards and travel cards generally sit higher still.
The bank that issues a premium card collects that higher interchange and uses it to help fund the perks. The cost reaches you through your processing fees.
Can you tell a rewards card from a basic one at the register?
Usually not. The card may say "rewards" or show a premium brand name, but your cashier isn't going to check, and you can't reliably tell from the card face anyway.
Even if you could, you generally can't refuse it. Card network rules include an honor-all-cards policy. If you accept a brand's credit cards, you're expected to accept all of that brand's credit cards, rewards or not. Visa publishes its rules and fee information for small businesses if you want to read the details.
So the card mix is mostly out of your hands. What you can do is understand it and plan for it.
How much difference does the card mix make?
It depends on your customers. A hypothetical helps.
Say your store runs $15,000 in card sales in a month. If most of your customers use basic debit, your total fees will look one way. If a large share of that same $15,000 comes from premium rewards cards, your total fees will be higher, even though your sales didn't change.
That's why fees can seem to drift up over time. Card issuers keep marketing rewards cards, and more customers carry them. Your prices may be the same, but the mix at your counter shifts.
The fix isn't to fight your customers. It's to watch your effective rate, meaning total fees divided by total card sales, and adjust your plan or pricing if it keeps rising.
What can you actually control?
A few things are in your hands.
Your pricing plan matters. Some plans pass interchange through at cost plus a markup. Others bundle it into tiers. The same card mix can cost differently on different plans.
A cash discount program is another option. NRS Pay plans include one. The general idea is that prices are posted with a small card cost built in, and customers paying cash get a discount. Rules vary by state, so check your state and local requirements, and ask the NRS Pay team how it works before you set it up.
And keep your sales card present. A premium card dipped at the counter usually costs less than the same card keyed in. A working card reader helps with that.
Frequently asked questions
Can I refuse to accept rewards credit cards?
Generally, no. Card network rules include honor-all-cards provisions, so if you take a brand's credit cards you're expected to take all of them, including premium rewards cards. The rules have some nuance by card category, so check with your processor if you have questions about what you're required to accept.
Why did my fees go up when my prices didn't change?
One common reason is card mix. If more of your customers switch to rewards or premium cards, your average interchange rises even with the same sales. Other causes include more keyed sales or plan changes. Compare your statements month to month and look at the fee breakdown by card type.
Does a cash discount program lower rewards card costs?
A cash discount program changes how card costs are handled at the register rather than lowering interchange itself. The idea is that posted prices reflect card acceptance, and cash payers get a discount. Rules vary by state, so check your state and local requirements and ask your processor how their program works.