Interchange fees are the largest single component of payment processing costs for most merchants — yet many business owners don’t know exactly what they are, who sets them, or why they vary so dramatically between transactions. This guide explains interchange fees from the ground up, helping merchants understand what they’re paying and why.
What Are Interchange Fees?
Interchange is a fee paid by the merchant’s acquiring bank (your payment processor’s bank) to the customer’s issuing bank (the bank that issued the customer’s card) for every card transaction. It compensates the issuing bank for the risk it takes in guaranteeing payment, providing credit, and maintaining the cardholder relationship.
In practice, interchange is passed through from the issuer to your payment processor, and then from your processor to you as part of your processing cost. Most processors bundle interchange into your overall rate; processors offering interchange+ or IC++ pricing show it as a separate line item.
Who Sets Interchange Rates?
Interchange rates are set by the card networks — Visa and Mastercard publish their interchange rate tables twice per year (April and October). The rates are non-negotiable by individual merchants. American Express and Discover set their own rates for their networks.
Why Interchange Varies: The Key Factors
- Card type: Debit cards: ~0.05%–1.05%. Standard credit: ~1.5%–2.0%. Premium rewards credit: 2.1%–2.5%+. Corporate purchasing cards: varies by data level submitted.
- Transaction method: Card-present (in-person, chip/contactless): lower interchange. Card-not-present (online, keyed): higher interchange due to higher fraud risk.
- Merchant category code (MCC): Some industries receive lower interchange rates (government, utilities, recurring subscriptions). High-risk categories may pay more.
- Data quality: Transactions with address verification, CVV, and settlement timing optimized qualify for lower categories than incomplete transactions.
What Merchants Actually Pay
Merchants don’t pay interchange directly — they pay their payment processor, who pays interchange (plus scheme fees and their own markup) from what the merchant pays. On a flat-rate plan like ConvesioPay, you pay 2.9% + $0.30 regardless of the underlying interchange rate. On an IC++ plan, interchange is passed through at cost and you see it as a variable line item.
How to Minimize Interchange on Your Processing
See our guides on interchange optimization strategies and Level 2/3 data for B2B transactions for specific tactics. For most ecommerce merchants, the most reliable approach is choosing a transparent processor, avoiding junk fees, and ensuring complete authorization data is submitted with every transaction.
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