Interchange Fee

An interchange fee is a fee paid to the cardholder's bank, the issuer, on every card payment. Card networks such as Visa and Mastercard set the rates. It is the largest part of what a merchant pays to accept cards, and merchants can't negotiate it.

Who pays whom

On each purchase, the merchant's acquirer pays interchange to the customer's issuer. The card network sets the rate but doesn't keep the fee. The issuer uses it to cover card costs, rewards, and fraud and credit losses. The fee comes out of the amount the merchant receives.

Why rates vary

Interchange is a large table of rates, not one number. The rate depends on:

• Card type. Rewards and corporate cards cost more than basic debit cards.
• How the card was used, such as in person, online, or keyed in by hand.
• Region. Cross-border payments cost more.
• Merchant category. Some industries get lower rates.

A rate is usually a percentage plus a small flat amount. US credit card interchange averages roughly 2% of the payment.

Interchange-plus pricing

Most processors quote one blended rate, such as 2.9% + $0.30, with interchange included in the processing fee. With interchange-plus pricing, you pay the actual interchange on each payment plus a fixed markup. It can cost less at high volume, but your fees vary per payment, so reconciling against net volume takes more work.