Interchange rates are the fees a merchant’s bank pays to the cardholder’s bank each time a customer uses a credit or debit card. For credit cards, they generally run from about 1.10% to 3.15% of the sale, plus a small flat charge per transaction. Interchange is almost always the single biggest piece of what a business pays to accept cards, which is why the same $50 purchase can cost a merchant very different amounts depending on the card and how it’s run.
How the Fee Is Built
Every interchange fee has two parts: a percentage of the sale and a flat per-transaction charge. A rate quoted as 1.80% + $0.10 means the issuing bank takes 1.80% of the purchase amount plus ten cents. On a $50 sale, that works out to $1.00 — ninety cents from the percentage and a dime from the flat fee.
The money moves from the acquiring bank (the merchant’s bank) to the issuing bank (the one that gave the customer the card).1Visa. Credit Card Processing Fees and Interchange Rates The issuing bank keeps that fee to cover processing the payment, extending credit, and absorbing fraud and default risk. It’s also what funds rewards programs.
Who Sets Interchange Rates
Card networks set interchange rates, not the banks that collect them. Visa, Mastercard, and the other networks publish detailed schedules with hundreds of categories, each one reflecting a specific mix of card type, merchant industry, and transaction method.2Mastercard. Mastercard Interchange Rates and Fees The issuing bank receives the fee but has no say over what it will be.
Networks typically update these schedules twice a year, with new rates taking effect in April and October.3Mastercard. 2025-2026 US Region Interchange Programs and Rates
What Drives the Rate on a Given Transaction
Not every card swipe costs the same. Four variables do most of the work.
Card Type
Premium rewards cards cost merchants more than basic cards. A standard consumer credit card might sit near 1.50% + $0.10, while a rewards card for the same purchase can run above 2.00%. Corporate and purchasing cards occupy their own higher tier. The extra interchange is what pays for the miles, points, and cash back.
How the Card Is Run
A card physically dipped into a chip reader (card-present) generally costs less than a transaction keyed into a website or taken over the phone (card-not-present). Remote transactions carry more fraud risk, and the rate prices that risk in. Manual key entry, where a clerk types the number in by hand, carries the highest rates of all.
Merchant Industry
Networks assign each business a merchant category code, and some categories get preferential pricing. Charities, grocery stores, and utilities often pay lower interchange than restaurants, hotels, or general retail. The logic is partly historical and partly tied to chargeback rates and transaction volume.
Enhanced Data on Business-to-Business Sales
Businesses that accept corporate or purchasing cards can earn lower interchange by submitting extra transaction data. Level 2 adds fields like sales tax and a customer reference number. Level 3 goes further with line-item detail: product descriptions, quantities, unit cost.4Mastercard. Level 2 and 3 Data For B2B merchants processing large orders on corporate cards, qualifying at the enhanced-data tier can meaningfully cut costs.
Where Interchange Fits in Total Processing Cost
Interchange is the biggest piece of what a merchant pays, but it is not the only piece. Monthly processing charges bundle three things together:
- Interchange fees, paid to the issuing bank and set by the card network.
- Assessment fees, paid to the network itself for using its infrastructure. Visa’s runs around 0.14% of the transaction, and Mastercard’s is similar.
- Processor markup, paid to the merchant’s payment processor for handling the technical side. This varies widely by provider and pricing model.
Knowing that interchange accounts for most of the bill helps a business judge whether its processor’s markup is reasonable.
How You’re Billed: The Three Pricing Models
How a business sees interchange on its statement depends on which pricing model the processor uses.
Flat-Rate Pricing
The processor charges one blended rate on every transaction — something like 2.6% + $0.15 — regardless of card type or how the card was run. Interchange, assessments, and markup are all rolled in. It’s simple and predictable, which is why it’s popular with small businesses processing modest volume. The tradeoff: you pay the same rate on a cheap debit swipe as on a premium rewards card.
Interchange-Plus Pricing
The processor passes through the actual interchange on each transaction and adds a fixed markup, such as interchange + 0.25% + $0.10. Per-transaction cost fluctuates with the underlying interchange, but the markup is visible and consistent. This is the model most payment professionals recommend for mid-size and larger merchants.
Tiered Pricing
The processor sorts transactions into buckets, typically “qualified,” “mid-qualified,” and “non-qualified,” and charges a different rate for each. The processor decides which transactions fall into which bucket, and those definitions are often vague. Of the three models, this one gives the merchant the least ability to verify whether a transaction was priced correctly.
Debit Cards Have a Federal Cap. Credit Cards Don’t.
This is the distinction most business owners get wrong. The Durbin Amendment, part of the Dodd-Frank Act, is the only federal law that directly caps interchange, and it applies only to debit cards issued by banks and credit unions with $10 billion or more in assets.5Federal Register. Debit Card Interchange Fees and Routing
For those large issuers, the Federal Reserve’s Regulation II limits debit interchange to $0.21 plus 0.05% of the transaction. An issuer that meets certain fraud-prevention standards can add a $0.01 adjustment, taking the effective cap to $0.22 plus 0.05%.6Federal Reserve Board. Regulation II Debit Card Interchange Fees and Routing – Interchange Fee Standards On a $50 debit purchase, that’s roughly $0.245 at most.
Banks with less than $10 billion in assets are exempt from the cap. Their debit rates run noticeably higher, and the Federal Reserve’s own data shows average per-transaction fees for exempt issuers have risen in recent years.5Federal Register. Debit Card Interchange Fees and Routing The merchant can’t see in advance which type of issuer sent the card.
Credit card interchange has no federal ceiling at all. Visa, Mastercard, and the other networks set credit rates without any statutory limit. This is why credit acceptance consistently costs more than debit, and why rewards keep getting richer: nothing in federal law restrains the interchange that pays for them.
Passing the Cost Back: Surcharging Rules
Some merchants recover processing costs by adding a surcharge to credit card transactions. The card networks permit it under strict conditions. Mastercard caps surcharges at 4% of the transaction or the merchant’s actual cost of acceptance, whichever is lower, and requires at least 30 days’ advance notice to the network and the acquirer before a merchant starts.7Mastercard. What Merchant Surcharge Rules Mean to You Visa caps its surcharges at 3% or actual cost, whichever is lower. Surcharges can only apply to credit cards, never to debit or prepaid.
State law adds another layer. Roughly a dozen states have statutes restricting or prohibiting credit card surcharges, though courts have struck down or narrowed several of those bans on free-speech grounds in recent years. Before adding a fee at the register, check both the network rules and the current law in your state.
Chip Cards, Fraud Liability, and Rate Tiers
The move to EMV chip cards changed how fraud losses are assigned. Before the liability shift, issuers generally absorbed the cost of in-person fraud. After the shift, liability falls on whichever party has not adopted chip technology. A merchant whose terminal doesn’t read chips carries the counterfeit-fraud liability on a chip card that was processed via magnetic stripe. If both the terminal and the card are chip-enabled and the transaction runs through the chip, liability stays with the issuer.
The same risk logic drives interchange pricing. Chip-enabled terminals qualify for card-present rates, which are the lowest tier. Keyed entry carries the highest interchange and full merchant liability for fraud, a combination worth avoiding whenever another option exists.
What This Means Day to Day
A business owner never writes a separate check for interchange. When daily card sales settle, the processor subtracts interchange, assessments, and its own markup before depositing the net into the merchant’s account. The fees just never arrive.
Beyond per-transaction costs, chargeback fees sit on top: typically $20 to $100 per dispute depending on the processor, with some charging as little as $15 and high-risk accounts paying considerably more. Repeated chargebacks can push a merchant into a monitoring program with higher fees still, so preventing disputes matters as much as managing them.
For low-margin businesses and anyone with small-ticket sales, a few percentage points of processing cost eats directly into profit. Understanding interchange — what sets it, what moves it, and what you can control — is the starting point for keeping that cost in check.