EU Interchange Fee Regulation: Caps, Co-Badging, and Enforcement

The EU Interchange Fee Regulation, formally Regulation (EU) 2015/751, caps the interchange fees banks can charge on consumer card payments across the European Economic Area at 0.2% of the transaction value for debit cards and 0.3% for credit cards. Alongside those caps, it rewrote the business rules that card schemes impose on merchants, gave shops more freedom to steer customers toward cheaper payment methods, and forced acquirers to show merchants exactly what they pay on each transaction.

Which Cards and Transactions Are Covered

The caps apply to card-based payments where both the cardholder’s bank (the issuer) and the merchant’s bank (the acquirer) are located within the EEA, meaning all EU member states plus Norway, Iceland, and Liechtenstein.¹ Consumer debit cards, consumer credit cards, and prepaid cards all fall within scope.²

An interchange fee is the charge that flows from the merchant’s bank to the cardholder’s bank on every card transaction, and it is usually the largest element of what a merchant pays to accept a card. Historically these fees were set collectively by card schemes and passed through to merchants with no scope to negotiate, which is why the regulation targets them specifically.

Cross-border acquiring is covered too. If a merchant uses an acquirer based in a different EEA country, the capped rates still apply, which stops schemes from charging more on transactions routed across borders within the single market.

The 0.2% and 0.3% Caps in Practice

Consumer debit card transactions carry a maximum interchange fee of 0.2% of the transaction value. Consumer credit card transactions carry a maximum of 0.3%.² Both apply to domestic and cross-border transactions inside the EEA.

Member states can go lower on domestic debit. A country may allow a per-transaction interchange fee capped at no more than €0.05, which can be combined with a percentage rate as long as total interchange fees within each scheme do not exceed 0.2% of annual transaction value.² The 0.3% credit figure is a ceiling as well, not a floor, so acquirers and issuers can agree to lower rates where competition pushes them down.

What Falls Outside the Caps

Several categories of card payments are not subject to the consumer caps:

Commercial cards issued for business expenses, which have different cost and risk profiles.
Three-party card schemes, where a single entity acts as both issuer and acquirer, such as American Express’s proprietary model.³
ATM cash withdrawals.
Transactions on cards issued outside the EEA, where a merchant’s bank may face higher interchange fees.²

The three-party scheme exemption has a sharp limit. A three-party scheme loses its exemption as soon as it licenses other payment service providers to issue cards or acquire transactions, issues cards through a co-branding partner, or uses an agent. From that point the regulation treats it as a four-party scheme and the caps apply, with no volume threshold or grace period.³

Why Side Payments Don’t Undo the Caps

A cap on interchange fees would be worth little if schemes could route equivalent money to issuers through other channels. The regulation closes that door by treating any “net compensation” that flows from a scheme, acquirer, or intermediary to an issuer as an interchange fee for the purposes of the caps.⁴

The calculation looks at the total payments and incentives an issuer receives on regulated transactions, minus any fees it pays back. Both direct payments, such as volume bonuses, and indirect benefits, such as marketing subsidies, rebates for hitting transaction targets, or revenue from jointly run loyalty programs, count toward that total.⁴ National authorities also examine processing fees and licensing revenue for structures that look designed to offset the caps.

What Merchants Can Now Do at the Till

Before 2015, scheme rules typically required a merchant that accepted any card on a network to accept every card carrying the same brand, including expensive commercial cards. The regulation broke that link. Merchants must still accept all cards sharing the same interchange fee category, but they can refuse higher-fee commercial cards while continuing to accept consumer cards from the same network.² For a small business where a few corporate card transactions at uncapped rates can swallow margin, that is a real change.

Scheme rules can also no longer stop merchants from steering customers toward cheaper payment methods, whether through discounts, a suggestion at the checkout, or a visible preference. Merchants are free to tell customers about the interchange fees and service charges they pay, which many scheme rules had previously forbidden.⁵ One interaction with other EU law is worth knowing: while merchants gained the right to steer, the revised Payment Services Directive (PSD2) prohibits surcharging on consumer cards subject to the IFR caps. A merchant can offer a discount for using debit, but cannot add a fee for using a capped credit card.

Choice on Co-Badged Cards

Many cards carry more than one brand or payment application. The regulation stops schemes, issuers, acquirers, and processors from inserting automatic mechanisms that limit which brand or application the cardholder or merchant can select on a co-badged card. A merchant can configure the terminal to default to a preferred brand, which is useful when one network carries lower fees, but the cardholder can always override that default and pick a different brand on their card.² In practice the terminal has to show the available brands and let the customer choose.

Transparent Pricing on Merchant Statements

Acquirers used to quote a single blended rate with no breakdown of where the money went. The regulation requires them to unblend. Merchant service charges must be individually specified for different card categories and brands at different interchange fee levels, and the agreement between acquirer and merchant must itemize merchant service charges, interchange fees, and scheme fees for each category and brand.² A merchant who prefers simplicity can request blended pricing in writing, but transparency is the default.

After each transaction, the acquirer must give the merchant a reference identifying the transaction, the amount credited, and a breakdown showing the merchant service charge and interchange fee separately. With explicit consent, that per-transaction detail can be aggregated by brand, card category, and interchange rate and delivered periodically, but no less than once a month.²

Separation of Schemes and Processing

Payment card schemes must keep brand management and rule-setting legally and operationally separate from the entities that process transactions.² The aim is to stop a scheme from bundling its brand with a proprietary processor and forcing merchants to take both. With the two separated, processors have to compete on price and quality, and merchants can shop for processing services independently.

How the Rules Are Enforced

Each member state designates national competent authorities with investigation and enforcement powers, and those authorities are specifically tasked with countering circumvention.⁶ A number have signed a voluntary Memorandum of Understanding to coordinate, and a Government Expert Group at the EU level aligns their approach.¹

The regulation does not set EU-level fine amounts. Each member state establishes its own penalty regime for infringements and must take all measures necessary to apply those penalties, as well as provide adequate out-of-court complaint and redress procedures for disputes between merchants and their payment service providers.⁶

The United Kingdom After Brexit

The United Kingdom retained the caps domestically through the Interchange Fee (Amendment) (EU Exit) Regulations 2019, which domesticated the EU regulation into UK law under the European Union (Withdrawal) Act 2018.⁷ The 0.2% debit and 0.3% credit caps continue to apply to domestic UK transactions.

Cross-border transactions between the UK and the EEA are no longer covered by the regulation on either side. Both Mastercard and Visa raised their interchange fees on UK–EEA cross-border transactions after Brexit, and the UK’s Payment Systems Regulator later concluded the two schemes face no effective competitive constraint on outbound interchange fees, estimating the increases cost UK merchants roughly £150 million to £200 million per year. The PSR proposed reimposing 0.2% and 0.3% caps on outbound cross-border transactions, and in January 2026 the High Court ruled the regulator has the legal power to impose such caps by general direction, dismissing judicial review claims brought by Mastercard, Visa, and Revolut.⁸ The final cap levels and implementation date have not yet been set.

1
European Commission. Report on the Application of Regulation (EU) 2015/751 on Interchange Fees for Card-Based Payment Transactions
2
Legislation.gov.uk. Regulation (EU) 2015/751 of the European Parliament and of the Council
3
Legislation.gov.uk. Regulation (EU) 2015/751 of the European Parliament and of the Council
4
Legislation.gov.uk. Regulation (EU) 2015/751 of the European Parliament and of the Council
5
Legislation.gov.uk. Regulation (EU) 2015/751 of the European Parliament and of the Council – Article 11
6
Legislation.gov.uk. Regulation (EU) 2015/751 of the European Parliament and of the Council – Chapter IV
7
LexisNexis. Impact of Brexit: Interchange Fee Regulation Quick Guide
8
Judiciary of the United Kingdom. Mastercard Europe SA v Payment Systems Regulator