Interchange Fee

An interchange fee is the fee paid to the cardholder's issuing bank on every card transaction. It's set by the card networks — Visa, Mastercard, and others — and it forms the largest, non-negotiable component of the cost of accepting cards.

Who pays whom

On each purchase, the merchant's acquirer pays the interchange fee to the customer's issuer. The card network sets the rate but doesn't keep it — it flows to the issuing bank to cover the cost of issuing cards, funding rewards, and absorbing fraud and credit risk. The fee is deducted from what the merchant ultimately collects.

Why rates vary

Interchange isn't a single number. It's a large table of rates that depends on:

• Card type — rewards and corporate cards cost more than basic debit.
• Transaction type — card-present, online, or manually keyed.
• Region — cross-border transactions carry higher rates.
• Merchant category — some industries get preferential rates.

Rates are typically a percentage plus a small flat amount, averaging roughly 2% of transaction value in the US for credit cards.

Interchange-plus pricing

Some processors offer interchange-plus (cost-plus) pricing: you pay the exact interchange the networks set, plus a transparent, fixed markup. This contrasts with the blended flat rate — like 2.9% + $0.30 — that most processors quote, where interchange is bundled into a single processing fee. Interchange-plus can be cheaper at scale but requires more sophistication to reconcile against your net volume.