Interchange Fee
The fee paid by the merchant's bank to the cardholder's bank on every card transaction.
What is Interchange Fee?
An interchange fee is the transaction fee paid by the merchant's acquiring bank to the cardholder's issuing bank whenever a credit or debit card purchase is made. These fees are set by card networks like Visa and Mastercard and typically range from 1.5% to 3.5% of the transaction amount, plus a fixed per-transaction fee. Interchange fees are the largest component of credit card processing costs and vary based on card type, merchant category, and how the transaction is processed.
Why It Matters
Interchange fees represent 70-90% of your total payment processing costs. Understanding interchange is essential for evaluating processor pricing, identifying savings opportunities, and making informed decisions about which payment methods to accept. Merchants using interchange-plus pricing can see exactly what they're paying in interchange versus processor markup.
Related Terms
Interchange-Plus Pricing
A transparent pricing model showing actual interchange costs plus a fixed processor markup.
Acquirer vs Issuer
The two banks in a card transaction—one serves the merchant, the other serves the cardholder.
Merchant Account
A bank account that allows businesses to accept credit and debit card payments.
Card Scheme
A payment network that facilitates card transactions between issuers and acquirers.
Frequently Asked Questions
Interchange fees are set by card networks (Visa, Mastercard, etc.), not by payment processors. Networks publish rate schedules that apply to all processors equally.
No, interchange fees are non-negotiable and set by card networks. However, merchants can qualify for lower interchange categories by optimizing how transactions are processed.
Rates vary based on card type (debit vs credit, rewards vs basic), transaction method (in-person vs online), merchant category, and whether enhanced data is submitted.
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