When you research payment solution providers, you’ll start hearing the term “interchange” used when talking about payments. Interchange is the fee that credit card companies like Visa and Mastercard charge businesses to accept their cards.
The interchange fee depends on a number of factors and isn’t always easy to understand. In this article, we will break down credit card interchange fees so you will know exactly how much you’re spending when running your business.
In this post:
- What are interchange fees?
- How much does interchange cost?
- Visa interchange fees
- Mastercard interchange fees
- Discover interchange fees
- American Express interchange (OptBlue)
- What is the total cost of accepting credit cards?
- Set rate processing
- Subscription rate processing
TL;DR
- Interchange fees are not collected by your payment processor or bank; they go directly to the card-issuing banks.
- Interchange fees vary significantly depending on the card issuer, the issuing bank, type of transaction and/or merchant type. Memorizing all of the nuances is impossible, but understanding the interchange rate range most common for your business is a good best practice.
- While interchange fees are unavoidable, there are strategies to help minimize their impact, including choosing a cost-effective payment processor, implementing surcharging, and more.
What Are Interchange Fees?
Interchange is the fee credit card companies charge businesses to accept their cards. Essentially, the merchant pays the card brand for the convenience of accepting this payment method since that is the way your customers want to pay.
Interchange fees help cover the risks associated with accepting electronic payments while ensuring your company has access to guaranteed payment when a customer makes a purchase. Interchange fees are simply a cost of doing business.
Understanding the concept of interchange fees is crucial for businesses looking to optimize their payment processing costs. These fees are set by the payment networks and are typically expressed as a percentage of the transaction value or as a fixed amount per transaction. The exact fee structure varies depending on factors like card type, transaction type, industry, and location.
It’s important to note that interchange fees are not collected by your payment processor or bank; they go directly to the card-issuing banks. Your payment processor, however, plays a role in facilitating the transaction and deducts its own processing fee from the overall charge.
Debit card transactions generally have lower interchange fees compared to credit card transactions. This is because debit cards are linked directly to the customer’s bank account, and the risk of non-payment or default is lower. By actively encouraging customers to use debit cards, businesses can effectively reduce the interchange fees associated with card payments.
While interchange fees may seem like an added expense, it’s crucial to recognize the value they bring to your business. Accepting credit and debit cards allows you to cater to a wider customer base, improve customer satisfaction, and enhance the overall shopping experience. By offering convenient payment options, you can attract more customers and increase sales.
To ensure the interchange fees you pay are reasonable and competitive, it’s essential to regularly review and negotiate your fee structure with your payment processor. Stay informed about any updates or changes in interchange fee schedules to ensure you’re paying the most optimal rates for your business.
Additionally, optimizing your payment processing infrastructure and implementing measures to minimize chargebacks can have a significant impact on reducing interchange fees. By investing in secure payment gateways, fraud detection systems, and robust transaction processing protocols, you can lower the risk of chargebacks and avoid unnecessary fees.
Remember, while interchange fees are an inherent part of accepting card payments, implementing smart strategies and staying proactive can help you minimize their impact on your business. One such strategy includes implementing credit card surcharging to offset the cost of interchange fees. By understanding the fee structure, promoting debit card usage, and optimizing your payment processing operations, you can effectively manage and reduce interchange fees, ultimately improving your bottom line.
Interchange fees are an essential consideration for businesses that accept card payments. These fees are a cost that businesses incur to facilitate the convenience and security of card transactions. While it’s true that businesses pay interchange fees, it’s important to understand that they are a necessary part of the payment ecosystem.
Interchange fees enable payment networks and card-issuing banks to cover the costs associated with maintaining the infrastructure, managing fraud risk, and providing the benefits and rewards programs associated with credit and debit cards.
As a business owner, it’s crucial to factor in these interchange fees when evaluating the overall costs of accepting card payments. By understanding the dynamics of interchange fees and implementing strategies to optimize their impact, businesses can effectively manage their expenses and find a balance that allows them to provide convenient payment options to customers while minimizing the amount they pay in interchange fees.
How Much Does Interchange Cost?
Interchange fees vary widely across card brands, credit card networks, card types, and how you process cards. Credit cards that offer points or rewards cards typically come with higher interchange fees, as do corporate cards.
Generally, debit card transactions are much less expensive than credit card payments for you to process and come with a lower interchange rate than credit cards. Card-present transactions also incur lower rates compared to card-not-present transactions. However, an exemption to this is debit cards issued by a bank with less than $10 billion in assets, also referred to as “exempt”, often a local bank or credit union—these have some of the highest interchange rates of all.
While you have control over whether a cardholder’s card is swiped or keyed in at the point of sale, you can’t control what kind of card they use. That’s why interchange varies so widely. For a $100 transaction, a swiped Mastercard debit card will cost you around 27¢. However, for the same transaction, using a Visa corporate commercial credit card will cost you around $2.60. It’s easy to see how over the course of the year, these fees can stack up.
Below, we’ll give a sampling of interchange rates for the most popular card brands. Please note there are many other categories not covered in this table, including variations by card type, business type, whether the bank is regulated or exempt, and more.
Visa Interchange Fees
As mentioned earlier, interchange fees will depend on several variables. Before reading on, let’s also clarify the terminology you’ll see below.
Beyond the card type (debit, or the various kinds of credit cards), you’ll also see “exempt” or “regulated” which indicate different fees for debit cards. The Durbin Amendment established these two ratings to differentiate the card-issuing banks based on their assets.
For card issuing banks with assets in excess of $10 billion, these are regulated; card-issuing banks with less than $10 billion in assets are non-regulated and fall under the “exempt” category. The difference in these fees does vary significantly and is something the merchant has no control over or visibility into when the customer presents their card to pay.
Below is a list of common interchange for various scenarios, for the full list of interchange fees by Visa card type, refer to the guide linked below:
| Transaction Type | Card Type or Bank Classification/Interchange Fee |
| CPS/Retail, Debit – Card Present | Exempt: 0.80% + $0.15
Regulated: 0.05% + $0.21 |
| CPS/Card Not Present, Debit | Exempt: 1.65% + $0.15
Regulated: 0.05% + $0.21 |
| CPS-Restaurant, Debit – Card Present | Exempt: 1.19% + $0.10
Regulated: 0.05% + $0.21 |
| CPS/e-Commerce Basic, Debit | Exempt: 1.65% + $0.15
Regulated: 0.05% + $0.21 |
| CPS/Retail, Prepaid | Exempt: 1.15% + $0.15
Regulated: 0.05% + $0.21 |
| Retail, Credit, Performance Threshold III | Visa Signature: 1.65% + $0.10
Visa Signature Preferred: 2.10% + $0.10 Traditional Rewards: 1.51% + $0.10 |
| Small Merchant Product 2, Credit | Visa Signature: 1.43% + $0.10
Visa Signature Preferred: 1.88% + $0.10 Traditional Rewards: 1.43% + $0.10 |
See full Visa interchange rates.
Mastercard Interchange Fees
You’ll see below that MasterCard and Visa do not use the same criteria to delineate the type of transaction or card types, nor does their official guidance use the same verbiage. However, you’ll find the average interchange fee range of percentage plus the flat fee per transaction is similar to other popular card issuers.
| Transaction type | Program Name (Card Type)/Interchange Fee |
| Restaurant | World (USD): 1.85% + $0.10
World High Value (USD) 2.00% + $0.10 |
| Small Ticket (Transaction Amount <$5), Card Present | Core (USD): 1.65% + $0.02
World (USD): 1.90% +$0.02 World High Value (USD): 2.30% + $0.02 |
| Small Ticket (Transaction Amount <$5), Card Not Present | Core (USD): 1.95% + $0.02
World (USD): 2.20% +$0.02 World High Value (USD): 2.60% + $0.02 |
| Regulated POS Debit, purchases and purchases with cash back | Debit Rate (USD): 0.05% + $0.21
Prepaid Rate (USD): 0.05% + $0.21 |
| Payment Transactions, Debit and Prepaid Cards | Exempt Debit (USD): 0.19% + $0.53
Exempt Prepaid (USD): 0.19% + $0.53 |
| PIN Debit Payment Transaction | Rate (USD): 0.19% + $0.53 |
| PIN Regulated POS Debit | Rate (USD): 0.05% + $0.21 |
See full Mastercard interchange rates.
Discover Interchange Fees
Discover does not publish its full interchange rates online, so below is an estimate provided by a third-party provider. Please note that for debit cards, the fees will vary depending on whether the bank is regulated or exempt and for credit cards it will vary depending on whether the card is swiped or hand-keyed.
| Card Type | Interchange Fee |
| Discover Debit, card present | Exempt: 1.10% + $0.16
Regulated: 0.05% + $0.22 |
| Discover Debit, card not present | Exempt: 1.75% + $0.20
Regulated: 0.05% + $0.22 |
| Discover Consumer credit card | Swiped: 1.56% + $0.10
Keyed: 1.87% + $0.10 |
| Discover Rewards | Swiped: 1.71% + $0.10
Keyed: 1.97% + $0.10 |
To access full Discover interchange rates, you need to use a verification code provided by your acquirer.
American Express Interchange Fees
American Express works differently from the other brands in that the card type does not impact the processing rate. Instead, your industry or merchant category code (MCC) will play a larger role in deciding how much you pay in credit card processing fees.
For smaller businesses, you’ll probably be accepting American Express through their program called OptBlue. Through OptBlue, your payment technology provider will determine how much you pay for AmEx and bundle it in with the ability to accept more popular card types. This way, you can accept AmEx customers (who historically have higher ticket prices) without breaking the bank.
You can read more about the OptBlue program at Merchant Maverick.
How Do Credit Card Interchange Fees Work?
As you can see, interchange fees vary from one credit card network to the next. These fees are set by Visa, Mastercard, Discover, and American Express every April and October. As for how these fees are split, a percentage of the interchange rates goes to the card issuers aka card-issuing banks—e.g., Capital One, Chase, or Bank of America. The rest of the fees go to the credit card brand. This is important to point out because it shows that interchange fees are not charged by your payment processing company (and thus, they’re non-negotiable).
Payment processors typically charge a markup on top of the interchange, which is essentially how they make money. So while you technically can’t negotiate your way to lower interchange fees, you can still save on overall payment processing costs by working with the right provider.
How Much Do You Pay?
At the end of the day, how much you’re paying for credit card processing relies on your payment solutions provider. Many payment processors like Stripe, Square, PayPal, and bank merchant services offer flat-rate processing. Some others, including Stax, offer subscription-style processing that gives you access to the lowest rates of interchange.
Avoiding Higher Interchange Fees
In the modern digital age, electronic payments have become the norm, with credit and debit cards being widely used for transactions. However, along with the convenience of card payments, businesses face the challenge of interchange fees, which can significantly impact their bottom line.
Choose the Right Payment Processor
The choice of payment processor plays a crucial role in managing interchange fees. Different processors offer various pricing models, so it’s essential to compare options and negotiate competitive rates. Look for processors that provide transparent pricing structures and offer interchange plus pricing, where the interchange fee is passed through directly without any markup. This approach can help you avoid unnecessary additional charges and optimize your fee structure.
Optimize Card Acceptance
Understanding the types of cards you accept and their associated interchange fees is key to minimizing costs. Payment networks classify cards into different categories, and fees vary depending on factors like card type (credit or debit), payment method (chip and PIN, contactless), and industry-specific cards (corporate, rewards). By optimizing your card acceptance policies, you can encourage customers to use lower-cost payment methods and reduce interchange fees.
Encourage Debit Card Usage
Debit cards generally carry lower interchange fees compared to credit cards. Actively promoting debit card usage among your customers can help lower your overall interchange fee expenses. Consider offering incentives, such as discounts or rewards, for customers who choose to pay with their debit cards. This not only benefits your customers but also reduces your payment processing costs.
Streamline Processing and Reduce Chargebacks
Efficient transaction processing and minimizing chargebacks can have a positive impact on interchange fees. Implementing secure payment gateways and fraud detection systems can help reduce the risk of chargebacks, which can result in costly fees. Furthermore, optimizing your payment infrastructure to streamline processing and minimize errors can help prevent unnecessary charges and improve overall cost efficiency.
Regularly Review and Update Your Fee Structure
Interchange fees are subject to change, as payment networks periodically update their fee schedules. It is crucial to stay informed about these changes and periodically review your fee structure to ensure you’re paying the most competitive rates available. This review process may involve renegotiating with your payment processor or exploring alternative options in the market to find the best fit for your business.
Consider Surcharge Programs
Depending on your region and applicable regulations, you may have the option to implement surcharge programs, where you pass on the interchange fees to customers directly. While this strategy requires careful consideration and compliance with legal requirements, it can be an effective way to offset interchange fees (especially for a small business) and transfer the cost to the end-user.
Interchange fees are charges imposed by payment networks, such as Visa and Mastercard, for processing card transactions. While these fees are unavoidable, there are several smart strategies that businesses can employ to minimize their impact. In this article, we will explore practical tips to help businesses navigate and reduce interchange fees effectively.
Here’s how these different rates work:
Tiered Pricing
A common pricing model in the payment processing realm is called tiered pricing. This method bundles the interchange rate with the processor’s markup and then puts your transactions into three tiers: qualified, mid-qualified, and non-qualified.
Card payments that are in the “qualified” tier incur lower rates while “non-qualified” transactions cost more to process.
Here’s where things get dicey: how transactions are categorized is completely at the discretion of the processor. What some payment processing companies consider as “qualified” may not be the same for others. There’s no transparency with tiered pricing fees, making it difficult to figure out whether or not you’re overpaying.
Set Rate Processing aka Flat Fee Processing
With set rate processing, you have a non-negotiable flat fee per credit card transaction, regardless of card or industry type. For instance, Stripe charges 2.9% + 30¢ per transaction. So whether you’re accepting a debit card with a 0.05% + 22¢ interchange rate or a corporate card with a 2.50% + 10¢ interchange rate, you pay the same rate.
While this may seem simpler at first, the reality is that you could be overpaying for credit card processing with these systems. In the example above, Visa would receive the .05% + 22¢, while Stripe would be making a whopping 2.5% + 8¢ on your transaction. That’s why we introduced simple subscription-based pricing.
Flat Subscription Rate Processing
Subscription-based processors have a similar concept to other subscription services you’re used to, such as warehouse stores like Costco. You pay a low fee to get access to warehouse pricing on goods, where you then can buy as much as you want with no cap on savings. Stax’ subscription pricing starts at just $99 per month. Regardless if your sale is $50 or $5,000, you pay the flat cost of processing without a percent markup.
Every business is different, which is why we don’t believe in one-size-fits-all solutions. Based on the types of cards your customers are using and your average transactions, we’ll be able to show you exactly which type of plan makes sense for your business.
Quick FAQs about Credit Card Interchange Fees
Q: What are Credit Card Interchange Fees?
Credit Card Interchange Fees are the charges that credit card companies impose on businesses for the convenience of accepting their cards. They are set by the payment networks and are typically expressed as a percentage of the transaction value or as a fixed amount per transaction.
Q: Who sets the Credit Card Interchange Fees?
Credit Card Interchange Fees are set and updated every April and October by credit card networks such as Visa, Mastercard, Discover, and American Express.
Q: Who collects the Credit Card Interchange Fees?
Interchange Fees are not collected by your payment processor or bank. They go directly to the card-issuing banks. The payment processor facilitates the transaction and deducts its own processing fee from the overall charge.
Q: Why are Interchange Fees important for businesses?
Understanding and managing Interchange Fees is crucial for businesses as they significantly impact payment processing costs. They enable businesses to offer convenient payment options, cater to a wider customer base, and enhance the shopping experience, thereby increasing sales.
Q: What factors influence the amount of Interchange Fees?
The exact fee structure varies depending on factors like card type (credit or debit), transaction type (chip and PIN, contactless, etc.), industry, and location. Also, Debit card transactions generally have lower interchange fees compared to credit card transactions.
Q: What strategies can businesses employ to minimize Interchange Fees?
Businesses can minimize the impact of Interchange Fees by choosing a cost-effective payment processor, promoting debit card usage, optimizing payment processing operations, implementing measures to minimize chargebacks, and regularly reviewing and negotiating their fee structure with the payment processor.
Q: What is the average range of Interchange Fees?
On average, Interchange Fees are around 0.3-0.4% of the transaction amount in Europe and 2% in the US.
Q: How does the choice of Payment Processor affect Interchange Fees?
The choice of Payment Processor plays a key role in managing Interchange Fees. Different processors offer various pricing models, and choosing one that provides transparent pricing structures and offers interchange plus pricing can help businesses optimize their fee structure.
Q: What are the differences between Interchange Fees for Visa, Mastercard, Discover, and American Express?
The Interchange Fees vary from one credit card network to the next, and the fees depend on several variables like card type, transaction type, and the bank’s assets. Each credit card network has its own fee structure and rules for partners.
Q: What are the benefits of Flat Subscription Rate Processing?
Flat Subscription Rate Processing allows businesses to pay a flat cost for processing without a percent markup, regardless of the sale amount. It’s a transparent and cost-effective solution, especially for businesses with high volumes of transactions.
