What interchange is, and why nobody can discount it for you

Written 30 October 2026 · 8 min read

This piece is a draft. The figures and sources will be checked again before it is called finished.

A customer taps a card for $40. A few days later, something less than $40 lands in your bank account. The biggest piece of the difference is called interchange, and it is the part of the fee your processor had nothing to do with. This piece is about that piece: who sets it, who keeps it, why it exists, and why a salesman who says he can discount it is describing something else.

Five parties, one tap

A card payment has more people in it than the two at the counter.

1. The cardholder, who taps.
2. The issuing bank, whose name is on the card and who lent the cardholder the money, or holds the account the money comes from.
3. The merchant, you.
4. The acquirer, the bank or processor that holds your merchant account and receives the money on your behalf. Your processor or ISO is this party, or works for it.
5. The card network, Visa, Mastercard, and the others, which runs the wires between the issuing bank and the acquirer and writes the rules both must follow.

When the card is tapped, the acquirer asks the network, the network asks the issuing bank, and the issuing bank says yes. At the end of the day, the issuing bank sends the money across the network to the acquirer, and the acquirer deposits it with you. The fees come out along the way, and each party takes its own.

Interchange is the issuing bank's share

Interchange is the fee the issuing bank keeps when it sends the money across. On a $40 sale on an ordinary credit card, the issuing bank keeps about 70 cents and sends the rest on. That 70 cents is interchange. It never reaches your processor. It never reaches the network. It is deducted by the bank that issued the card, before anyone else sees the money, and it is the bank's income.

The bank keeps it for three things it is doing on that sale. It is lending the cardholder $40 until the statement is paid, and carrying the risk that it never is. It is paying for the fraud that happens on its cards. And, on a rewards card, it is paying for the points the cardholder is earning on your sale. Interchange is how the card-issuing side of the industry is paid, and that is why it is the largest fee on your statement: the issuing bank is doing the most expensive part of the job.

The network sets it, and publishes it

The issuing bank keeps interchange, but it does not set it. The card network does. Visa publishes a table of interchange rates for every kind of card and every kind of transaction; so does Mastercard; so do the others. Every issuing bank on that network charges the rate in the table, and every acquirer pays it. The tables are public, on the networks' own sites, and they change twice a year, usually in April and October.

Because the table is published, interchange is the one part of a card fee that is the same for every processor in the country. Your processor pays the same interchange on your $40 sale as any other processor would. Whatever you are quoted, by whomever, this part of the price was never theirs to set.

Why it differs from one tap to the next

The table has hundreds of rows, because interchange depends on three things, and the same $40 can land in very different rows.

What kind of card. A debit card from a large bank has its interchange capped by law, under a Federal Reserve rule called Regulation II, at a few cents plus a fraction of a percent. A debit card from a small bank or credit union is exempt from the cap and costs more. An ordinary credit card costs more again. A rewards card costs more than that, because the points have to come from somewhere, and a premium rewards card or a business card costs the most. Here is one $40 sale, five cards, using rates typical of the published tables:

These five are examples drawn from the hundreds of rates in the networks' published interchange tables, rounded, and typical of a restaurant taking the card in person. Your own rows depend on your business type and how each card is taken. The tables themselves: Visa's at usa.visa.com/support/small-business/regulations-fees.html and Mastercard's at mastercard.us/en-us/business/overview/support/merchant-interchange-rates.html; if either page has moved, search for "Visa USA interchange reimbursement fees" or "Mastercard US interchange rates".

Same sale, same counter, same processor. The cheapest card cost a quarter and the dearest more than a dollar, and nothing you did decided which.

How the card was taken. A card tapped or inserted at the counter is cheaper than one keyed in by hand, which is cheaper than one typed into a website. The network charges more when it is less sure the card was really there, because fraud is more likely and the issuing bank will carry it. A sale that should have been a cheap card-present row can land in a dear one if the terminal keyed it, if the address check was skipped, or if the day's batch was not closed on time. On a statement these show up under names like "Standard" or "EIRF", and they are the one part of interchange a merchant's own habits can move.

What kind of business you are. The table has rows for supermarkets, petrol stations, restaurants, charities, utilities and more, each with its own rates, set by the merchant category code your acquirer assigned you when you signed up. A café is "restaurant", and pays restaurant rates.

Why no processor can discount it

Here is the sentence to hold on to: interchange is a fixed cost your processor must pay on every sale, whatever it charges you. On the $40 sale, the network's table said 70 cents, the issuing bank kept 70 cents, and your processor owed that 70 cents the moment the card was approved. It owes the same 70 cents whether it bills you 71 cents or two dollars for the sale. It cannot discount a cost it has to pay regardless, any more than a shop can discount the wholesale price of what it sells. What it can do is charge you less of its own share on top.

So when a salesman says "we can get you a lower interchange rate", one of three things is true, and it is worth knowing which.

• He means his own markup, the part the processor adds on top, and is calling it interchange because the word sounds technical and the merchant will not know the difference. This is the common case. A lower markup is a real saving; calling it interchange is not honest.
• He means qualifying your sales for cheaper rows. Making sure cards are tapped rather than keyed, batches close on time, and, for merchants who take a lot of business cards, that the extra data those cards' rows ask for is sent. This is real work, sometimes called interchange optimisation, and it can genuinely move sales from a dear row to a cheap one. It does not lower any rate in the table. It lands your sale in a different row of it, and an honest processor describes it that way.
• He means nothing, and is quoting a flat rate below your current effective rate while your card mix happens to be expensive this quarter. The piece on reading a statement explains why that comparison only holds if the cards are the same.

The honest version of all three is the same sentence: nobody discounts interchange; some processors charge less on top of it, and some help you land in cheaper rows.

What this means on your statement

On an interchange-plus statement, interchange is listed row by row with the networks' own names, and you can find each one in the published table. On a flat-rate or tiered statement it is not shown, but it was paid all the same, by your processor, out of the rate you were charged. In either case it is the floor under your fees: on a card-present café with plenty of debit, interchange alone runs around 1.4 to 1.7 percent of sales, the networks' own fees add about a quarter of a percent, and everything above that is the processor. How to read your processing statement works through a whole month that way.

What you can do about it

Less than a salesman will suggest, and more than nothing.

• Take the card properly. Tap or insert, never key, when the card is there. Close the batch every day. These keep your sales in the rows they belong in.
• Know your mix. If your statement lists interchange by row, you can see how much of your bill is premium and business cards. That knowledge is what lets you judge a flat-rate quote, which assumes a mix and charges for it whether or not it is yours.
• Always compare effective rates. Total fees divided by card sales, on your own statement and on any quote worked onto the same month. Since the interchange is the same for every processor, the whole difference between two effective rates is what each processor adds on top, and that one number is the comparison, whatever the pricing plan and whatever the lines are called.
• Do not pay to have interchange "reduced". If a product or service promises to lower your interchange, ask which of the three things above it means. The second is worth something, for some merchants. The first and third are not.

The figures in this piece are typical of the published tables and are not quoted from a specific edition. The tables change in April and October; look up the current one before you repeat a number. None of this is legal or financial advice.

Sources

• Visa, Visa USA Interchange Reimbursement Fees, published on visa.com.
• Mastercard, U.S. Region Interchange Programs and Rates, published on mastercard.us.
• Board of Governors of the Federal Reserve System, Regulation II (Debit Card Interchange Fees and Routing), 12 CFR Part 235.