Interchange Fee

The interchange fee is the wholesale fee paid by a merchant's Acquirer (Acquiring Bank) to the cardholder's Issuer (Issuing Bank) every time a card transaction is processed. It is the largest single component of the total cost a merchant pays to accept card payments, and it flows directly from the merchant (via the acquirer) to the issuing bank, compensating the issuer for the credit risk, fraud liability, and cost of funds involved in extending payment capability to cardholders.

Interchange rates are set by the Card Networks / Card Brands, Visa, Mastercard, Amex, and Discover publish their interchange schedules, which are updated typically twice per year (in April and October for Visa and Mastercard). The rates are not negotiated by individual merchants, they are industry-wide wholesale rates that apply uniformly to all acquirers and processors. What merchants do negotiate is what their processor charges above interchange, which is the processor's margin.

Interchange rates are not uniform. They vary across dozens of variables: card type (consumer credit carries higher interchange than regulated debit), card tier (premium rewards cards carry higher interchange than basic consumer cards), transaction type (card-not-present transactions carry higher interchange than card-present), merchant category code (supermarkets and utilities have preferential rates; travel and entertainment carry higher rates), and transaction size (some categories have per-transaction flat fees that proportionally affect small transactions more than large ones). For Visa and Mastercard consumer credit cards in the US, the average interchange rate across all transaction types is approximately 2.35%, according to Helcim data sourced from 2025.

Understanding interchange is foundational to payment cost management. It is the floor beneath every pricing model, Interchange-Plus Pricing makes this floor transparent; Blended Rate Pricing and Flat-Rate Pricing bundle it with other costs into a single rate.