Eitan’s Markup Hadn’t Changed in Four Years. His Effective Rate Climbed 43 Basis Points Anyway.
Eitan’s Markup Hadn’t Changed in Four Years. His Effective Rate Climbed 43 Basis Points Anyway.
Why is my processing rate increasing — that was the question Eitan Cohen called his processor demanding to answer. Eitan runs Levantine Pantry, a specialty Mediterranean and Middle Eastern grocery store on Harvard Street in Brookline, Massachusetts. He carries the things you can’t find at the chain stores — Lebanese seven-spice blends his customers’ grandmothers asked for by name, Israeli halva in flavors no American supermarket stocks, fresh pita brought in three times a week from a bakery in Watertown, and a wall of olive oils that takes longer to explain than to sell.
He has been with the same payment processor since 2022. Interchange-plus pricing. Markup locked at 0.30% plus eight cents per transaction. Card volume around eighty-five thousand a month, give or take, depending on whether the holidays are landing inside a Jewish month or a secular one.
In early 2024 his effective rate was 2.31%. He calculated it the way he calculates everything — on a yellow legal pad, with the actual numbers from his statement, not the marketing number on the front page.
In April 2026 he calculated it again. 2.74%.
Forty-three basis points higher. On roughly a million dollars of annual card volume, that is about four thousand three hundred dollars a year his processor was now collecting that they had not been collecting two years earlier.
The markup line on Eitan’s statement was unchanged across all forty-eight months. No new fees appeared. No contract amendments. No processor acquisition. The processor was collecting exactly what they had agreed to collect in 2022 — and somehow, four thousand three hundred dollars more per year was leaving Eitan’s bank account anyway. Every dollar of the increase came from somewhere else.
He called his processor. Angry. Demanding to know when, exactly, they had raised his rate. Why is my processing rate increasing, he asked them, when you have not changed anything on my statement?
They told him, truthfully, that they had not raised his rate.
And he did not believe them — until they walked him through what had actually changed. This is the post about what they showed him.
The Markup, the Contract, and the Processor’s Behavior
Before the explanation goes anywhere, the things that genuinely had not changed need to be on the table.
Eitan’s processor markup was 0.30% plus eight cents per transaction in January 2022. It was 0.30% plus eight cents per transaction in April 2026. The line on his statement labeled “Discount Rate — Visa/MC/Disc” was unchanged across four years and forty-eight months of statements. The flip side shows up on a small-ticket business like a bar, where a per-item increase is felt first.
His contract terms had not changed. Same merchant agreement, same processor entity, no acquisition by a private equity firm, no rebranding, no quietly slipped amendment buried in a notice he never read. He had requested and reviewed his amendment history when he made the call. There was none.
His processor’s behavior had not changed in any way he could measure. Same statement format. Same monthly fees. Same support phone number. No new line items appeared between 2024 and 2026 that had not appeared in earlier statements.
When a merchant on interchange-plus pricing says their processor has not raised their rate, that statement should be verifiable on a single line of the statement: the markup line. If markup is the same dollar amount per hundred dollars of card volume month over month, the processor genuinely has not raised the rate. Every other line on the statement — interchange, network fees, downgrade categories — can move without the processor touching anything.
If you are quoted interchange-plus pricing and your markup has not moved, you are operating in the most transparent fee structure that exists in payments. The processor is collecting exactly what they agreed to collect — no more, no less. Interchange-plus is the only pricing model that shows you exactly what you’re paying, and Eitan was paying it.
The forty-three basis points came from somewhere else. Why is my processing rate increasing, the question Eitan was actually asking, had a three-part answer that lives in the statement itself.
His Customers Started Carrying Different Cards
The largest single driver of Eitan’s effective rate increase had nothing to do with his processor and nothing to do with him. It had to do with his customers — specifically, with what is in their wallets in 2026 compared to what was in their wallets in 2022.
Interchange is not one rate. It is a published menu of hundreds of different rates that vary by what kind of card the customer hands you. A basic Visa consumer credit card, swiped at a supermarket on a card-present transaction, pays interchange of around 1.20% plus a nickel. A Visa Signature rewards card at the same supermarket pays 1.65% plus a nickel. A Visa Infinite card — the premium tier, the metal ones, the ones that come with airline lounge access — pays 1.65% plus a nickel at the Spend Qualified level and higher if the customer hasn’t hit their spend threshold for the period.
Same store. Same transaction amount. Same swipe. The card decides the rate, not the merchant.
Between 2022 and 2026, two things happened to American consumer wallets simultaneously. Premium rewards cards proliferated — every major issuer launched or relaunched a flagship card with sign-up bonuses big enough to make the annual fee worth it for middle-class households who had previously carried no-fee basic cards. And small business credit cards, which had been a niche product for actual small business owners, became a mass-market product issued to anyone with a side hustle, an LLC, or a marketing pitch from their bank.
Every ten percentage points of card volume that shifts from basic consumer credit to premium rewards costs a typical retail merchant roughly five to eight basis points on the effective rate. A merchant whose customer base shifts from 60% basic / 30% rewards / 10% business to 40% basic / 45% rewards / 15% business will see an effective rate climb of fifteen to twenty basis points — with zero help from the processor.
Eitan pulled his Visa breakdown side by side. In Q1 2024, Visa Traditional Rewards transactions made up 34% of his Visa volume. In Q1 2026, they made up 47%. Visa Signature Preferred and Infinite — the premium tier — climbed from 8% to 17%. Visa Business credit cards, which had been a rounding error at 3%, were now 11% of Visa volume.
None of that was his processor’s doing. None of it was his doing. His customers’ banks had been sending them upgraded cards in the mail, and his customers had been carrying them. Brookline is the kind of neighborhood where the average household carries three premium credit cards by 2026.
The Visa CEDP Transition and the April 2026 Level 2 Sunset
The second driver was a single, specific, dated event — and it landed inside the window Eitan was measuring.
Through 2024 and most of 2025, Visa had run a program called Level 2 interchange that gave merchants a small discount on business and corporate card transactions if the merchant’s processor transmitted some additional data with each transaction — typically a customer code and a tax amount. Most merchants did not know this was happening. Their processors transmitted whatever data they could and pocketed the discount or passed it through depending on the pricing model.
In January 2026, Visa raised the Level 2 interchange rates on small business credit cards by 75 basis points. Three months later, in April 2026, Visa retired the Level 2 program entirely and replaced it with the Commercial Enhanced Data Program. The CEDP requires substantially more data per transaction to qualify for the reduced rate — line-item detail, verified data quality, the kind of information a retail point-of-sale system was never designed to transmit.
January 24, 2026: Visa Level 2 rates on small business credit cards increased 75 bps. April 18, 2026: Visa Level 2 program sunsetted entirely; replaced by CEDP, which most retail POS systems cannot qualify for. Any merchant accepting business credit cards is paying more in 2026 than in 2025 on those transactions, automatically.
For a grocery store running on Square or Clover or any other off-the-shelf retail POS, qualifying for CEDP is effectively impossible. Eitan’s small business card transactions — which had grown from 3% to 11% of his Visa volume during the same period — were now paying higher interchange than they had been in 2025, on a meaningfully larger share of his card mix.
This is the second answer to why is my processing rate increasing in 2026: more business cards, at higher interchange, in the same months. His processor did not raise his rate. Visa raised the interchange rate that flows through interchange-plus pricing untouched, and the math did the rest.
Network Fees Inched, the Average Ticket Grew
The third driver was smaller, but it compounded the first two.
On top of interchange, Visa and Mastercard charge a layer of network fees that sit between the interchange rate and the processor’s markup. Most merchants never see them broken out, because they appear as a thin line item far down the statement — Visa NABU, Visa APF, Mastercard Kilobyte Access Fee, Visa Digital Commerce Service Fee. Each one is small. Most are fractions of a cent per transaction. The Visa Acquirer Processing Fee is $0.0195. The Mastercard Kilobyte Access Fee is $0.0044.
The card brands nudge these fees upward every April and October, the same cycle Visa and Mastercard use to publish interchange changes. None of the individual increases are large enough to make the news. The Visa Digital Commerce Service Fee, introduced at 0.0075% in late 2023, was expanded in April 2026 to apply to both domestic and international card-not-present transactions — every online transaction Eitan ran now carried this fee. Mastercard introduced a new Force Post Transaction Fee at nine cents per transaction in April 2026.
None of that was on the marketing page of any processor’s website. None of it gets called out in a notice. It is simply why is my processing rate increasing one tenth of a basis point at a time, across forty-eight billable line items most merchants never look at.
Meanwhile, Eitan’s average ticket had grown from $34 to $41 between 2024 and 2026. Inflation, plus the addition of higher-margin specialty items he had started carrying. The percentage components of his fees were now being applied to larger transactions, and the per-transaction fixed components had grown as a share of the percentage components shrank.
Card mix shift (Driver One): approximately +24 bps. Visa CEDP transition (Driver Two): approximately +12 bps on the affected slice of volume, weighted to +5 bps on the total. Network fee increases plus average ticket growth (Driver Three): approximately +14 bps combined. Total: +43 bps over 24 months. Processor markup contribution: zero.
Why Is My Processing Rate Increasing When My Markup Is Locked? Because Interchange-Plus Protects the Markup, Not the Rate.
Most of the advice merchants get about payment processing fees boils down to: get off tiered pricing, get on interchange-plus, and your problems are over. The first half is correct. The second half is the part Eitan learned the hard way.
Interchange-plus pricing is the most transparent fee structure available to merchants. It separates the wholesale cost (interchange and network fees, set by the card networks) from the retail cost (the processor’s markup, set by negotiation). When the markup is locked, the processor cannot quietly raise their take.
What interchange-plus does not do — what no pricing model can do — is freeze the wholesale cost. Interchange and network fees are set by Visa, Mastercard, Discover, and American Express. They change twice a year, every year, in April and October. Your processor has no control over them, no ability to negotiate them, and no obligation to alert you when they move. They pass through what the networks charge. If the networks charge more, you pay more.
This is not a flaw in interchange-plus. It is the explicit design. The transparency you bought when you moved to interchange-plus is transparency into where your money is going — not insulation from the wholesale market.
If your effective rate climbed and your markup didn’t, your processor didn’t cheat you. Your card mix shifted, your network fees inched up, and Visa retired a program you didn’t know you were benefiting from. The fix is not switching processors. The fix is reading your statement quarterly and knowing which drivers you can influence (downgrade scrutiny, terminal-versus-keyed mix) and which you cannot (what your customers carry in their wallet).
A Quarterly Statement Review and No Processor Switch
By the end of the conversation with his processor, Eitan had stopped being angry. Not because the forty-three basis points had stopped mattering — they still cost him four thousand three hundred dollars a year — but because the explanation made sense, and a different processor would not have moved the number.
What he changed:
He moved his statement review from annual to quarterly. Quarterly is the right cadence to catch card-mix drift and network-fee changes before they accumulate into a year-over-year surprise. Annual is too slow. Monthly is more work than the typical merchant can sustain.
He started watching the downgrade categories — transactions that should have qualified for the lowest interchange rate but landed at a higher non-qualified rate because of an AVS mismatch, a delayed settlement, or a keyed entry that should have been swiped. Downgrades are the one driver inside a merchant’s control. He found roughly $180 a month of downgrade fees he could eliminate with cleaner card-present discipline and proper AVS data entry on phone orders.
Card mix is set by your customers. Network fees are set by Visa and Mastercard. Visa CEDP is set by federal-scale program decisions. Downgrades are the only driver inside a merchant’s reach — and they typically account for 5 to 15 basis points of avoidable cost. Quarterly statement review with explicit attention to the downgrade categories is the single highest-leverage habit a merchant can build.
He left his processor alone. They had done nothing wrong. Switching processors at a higher markup to escape interchange he could not escape anyway would have been the most expensive mistake he could make.
If your effective rate has climbed and you do not know why your processing rate is increasing, the answer is almost never that your processor raised your rate. The answer is almost always in the statement, in the breakdown by card type and the network fee line items, in the quiet arithmetic of a card mix that has shifted without anyone telling you. Reading the statement is the only diagnostic that works.
Frequently Asked Questions
Almost never. If your effective rate climbed because of card mix shift and Visa CEDP changes — the two largest drivers in 2026 — switching processors moves you to a different markup but does not change the underlying interchange. You will pay the same interchange at the new processor, and likely a higher markup if you are leaving a relationship-priced contract for a fresh quote. Switch only if your current markup is genuinely above market (above 0.40% plus a dime for retail; above 0.50% plus a dime for restaurants or e-commerce), not because your effective rate moved.
Quarterly is the right cadence for most merchants. Calculate your effective rate (total fees divided by total card volume), break down volume by card type (consumer credit, rewards, business, debit), and watch the downgrade categories. Annual is too slow to catch drift before it compounds. Monthly is more granular than card-mix data warrants — single months are too noisy to reveal trends.
The Commercial Enhanced Data Program replaced Visa’s older Level 2 interchange program in April 2026. It applies to business, corporate, and purchasing card transactions only — consumer credit cards are unaffected. To qualify for the reduced CEDP interchange rate, the merchant’s processor must transmit verified line-item detail with each transaction, which most retail point-of-sale systems cannot do. If you accept business credit cards and you are not on a B2B-specialized payment platform, your interchange on those transactions went up in 2026 and will stay up.
Send Us Your Last Three Statements. We’ll Find the Drivers.
If your effective rate has climbed and you do not know why, the answer is in the statement — usually in three or four line items most merchants never read. Send Brookside one recent statement and the corresponding month from twelve and twenty-four months ago. We will calculate the drift, break out card-mix shift from network-fee increases from CEDP exposure, and tell you which drivers you can influence and which you cannot. The math takes us about fifteen minutes. Learn more about payment processing consumer protections from the CFPB.
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