What are interchange fees, and who gets the money?

What are interchange fees? They're the fees the card-issuing bank collects each time one of its cards is used at your business. Visa and Mastercard set the rates and publish them in long schedules. Your processor pays the issuing bank and builds that cost into what it charges you.

Interchange sits inside the cost of almost every Visa and Mastercard sale you take, but your statement rarely explains it. Every network rate we quote below comes from the current Visa or Mastercard schedule, so you can check the math yourself.

Who gets interchange fees, and who sets them?

The issuing bank gets the money: the bank or credit union that gave your customer the card. Mastercard says its interchange rates "are established by Mastercard, and are generally paid by acquirers to card issuers on purchase transactions" (Mastercard). The acquirer is the bank behind your merchant account, which you usually deal with through your processor.

You never pay the issuer yourself. Visa's merchant page says merchants don't pay interchange directly; they "negotiate and pay a 'merchant discount' to their financial institution that is typically calculated as a percentage per transaction" (Visa). Mastercard adds that it "has no involvement in acquirer and merchant pricing policies or agreements."

That gives you two separate decisions inside every card price. The network decides interchange, and it's the same whichever processor you pick. Your processor decides everything it adds on top, and that part you can negotiate.

How is interchange different from network fees and markup?

Card processing costs come in three layers, and each one has a different owner:

Mastercard calls interchange "only one of many cost components" in a merchant discount rate, which is a polite way of saying the other layers add up too.

Interchange and network fees are often called pass-through costs. On interchange-plus pricing, your processor passes both through at cost and shows its markup on separate lines. On a flat-rate or tiered plan, all three layers get blended into rates the processor picks, so you can't tell which part went where.

What makes one interchange rate higher than another?

Four things move the rate: the type of card, how the card was accepted, your type of business, and whether the sale met the network's data and timing rules. Location isn't one of them. A cafe in Dallas and one in Portland are priced off the same Visa USA schedule.

Mastercard spells out the data and timing part. Each of its rates has a list of requirements that all have to be met, including "merchant category; the time between authorization and clearing; the presence or absence of magnetic stripe data; the submission of enhanced transaction data; and a merchant's Mastercard sales and transaction volume" (Mastercard).

Here's a slice of Visa's schedule, with rates effective April 18, 2026 (Visa USA Interchange Reimbursement Fees):

The card itself makes the biggest difference. A rewards card costs more than a basic one, and premium cards cost more again. On a typical sale, debit from a large bank is the cheapest of all, because federal rules cap it. On very small tickets its fixed 21 cents changes the picture, as the example below shows.

How the card was taken comes next. The same Traditional Rewards card costs 1.65% + $0.10 when dipped or tapped in person and 2.04% + $0.10 when the sale is card-not-present, like an order through your online checkout. Keying an exempt debit card at the counter roughly doubles its percentage, from 0.80% to 1.65%.

Mastercard follows the same logic. In its 2026-2027 US schedule, effective April 17, 2026, the "Merit III Base" rate for consumer credit runs from 1.65% + $0.10 on Core cards to 2.30% + $0.10 on World Elite cards, while key-entered Core sales are 1.95% + $0.10 (Mastercard).

Business type and size matter too. Visa lists separate rows for categories such as restaurants, travel, healthcare and insurance. Mastercard's cheapest Merit III rate, "Tier 1," requires USD 1.80 billion in annual qualifying volume, which tells you who those volume tiers are built for.

A worked example: one $100 sale on seven different cards

Take a $100 purchase and run it through Visa's April 18, 2026 schedule. Interchange is the percentage times the sale, plus the per-item fee.

Same $100, same store, and the cost ranges from 27 cents to $3.25. Your customer picks the card. You don't.

That's interchange alone. To get your real cost, add the network's fees and your processor's markup. If your markup were 0.20% + $0.10 (an example, not a quote), the dipped Traditional Rewards sale would cost $1.75 + $0.20 + $0.10 = $2.05 before network fees.

Per-item fees hit small tickets hardest. On a $5 regulated debit sale, the percentage part is a quarter of a cent, but the 21 cents and the 1 cent adjustment still apply. That's about 22 cents, or roughly 4.5% of the sale. A coffee shop and a furniture store can see the same card mix and very different interchange as a share of sales.

Regulated debit: the one interchange rate capped by law

Debit cards from big banks are the exception to "the networks set the rates." Under the Federal Reserve's Regulation II, a covered issuer "may not receive, for any electronic debit transaction, an interchange fee that exceeds $0.21 plus 0.05 percent multiplied by the value of the transaction, plus a $0.01 fraud-prevention adjustment, if eligible" (Federal Reserve).

Covered means large. The Fed's exempt list is made up of institutions that, together with their affiliates, reported assets of less than $10 billion as of December 31, 2025 (Federal Reserve). Debit cards from those smaller banks and credit unions get the networks' exempt rates instead, like Visa's 0.80% + $0.15 for in-store sales.

The cap could change. In October 2023 the Fed proposed lowering it, and under that proposal the cap on an average $50 debit sale would drop from 24.5 cents to 17.7 cents (Federal Reserve). Visa's April 2026 schedule still lists regulated debit at 0.05% + $0.21, so for now the existing cap is what merchants see. It's a federal rule, so it works the same way for a business anywhere in the United States.

What this means for you: a debit-heavy business has a much lower true cost than a flat rate suggests. Only pricing that passes interchange through at cost hands you that difference.

How does interchange show up on your statement?

That depends on your pricing model.

• On interchange-plus, you see interchange broken out by category, with the count, volume and rate for each, and your processor's markup on its own line. It's the only model where you can check every rate against the network schedule.
• On a flat rate, one rate covers every card, so a 27 cent debit sale and a $2.20 premium rewards sale are billed the same way. Interchange is in there; you just can't see it.
• On tiered pricing, your processor sorts sales into a few buckets with its own rates. Our guide to tiered pricing explains why that hides interchange too.

Here's what a few interchange-plus lines might look like. These are illustrative, and your processor's labels will differ:

With lines like these, you can match each rate to the schedule. If a rewards line shows 2.04% on sales you dipped at the counter, ask why. Our walkthrough on how to read a merchant statement covers the rest of the page, and our page on credit card processing fees explains each layer in more detail.

Are interchange rates going to change?

They change on a schedule. Mastercard says its rates "are typically updated semiannually" (Mastercard), and both networks' current US schedules took effect in mid-April 2026. Check your statement after each update, because new categories and new rates show up there first.

A bigger change is still in court. On November 10, 2025, Visa reached a proposed settlement in the long-running merchant class action over interchange. Its terms include "a reduction of the U.S. combined average effective credit interchange rate by 10 bps for five years," a cap of 125 basis points on standard US consumer credit rates through the term of the agreement, and changes to surcharging and honor-all-cards rules (Visa Form 8-K).

The court granted preliminary approval on June 9, 2026 (Visa Form 10-Q). Preliminary approval isn't final approval, though, and until the court gives its final sign-off, none of those changes touch your rates. Don't let anyone sell you savings based on them yet.

What do people get wrong about interchange?

These misconceptions are worth clearing up before you compare quotes:

• "Flat-rate pricing means I don't pay interchange." You do. It's inside the flat rate, along with the network fees and the processor's margin. You just can't see it.
• "My processor sets interchange." It doesn't. The networks set and publish it, and your processor pays it to the card issuer. What your processor sets is everything on top.
• "Interchange is a percentage." Most rates are a percentage plus a fixed amount, like 1.65% + $0.10. On small tickets, the fixed part can matter more than the percentage.
• "All credit cards cost about the same." On Visa's April 2026 schedule, a Visa Signature Preferred card dipped in person costs 2.10% + $0.10, while a basic consumer card costs 1.51% + $0.10.
• "Debit is always cheap." Debit from a large bank is capped, but debit from a smaller bank isn't, and keying an exempt debit card in a store more than doubles its percentage.

Can you lower your interchange costs?

You can't negotiate the rates. You can change which rate your sales qualify for, and you can make sure your pricing passes the savings to you.

1. Dip or tap cards in person instead of keying them. The keyed and card-not-present rows in the tables above cost more.
2. Batch every day. Mastercard counts "the time between authorization and clearing" among its rate requirements.
3. Check your merchant category. Rates depend on it, so make sure your account carries the code that matches what you actually sell.
4. Send complete transaction data. Mastercard lists "the submission of enhanced transaction data" as a qualification factor.
5. Get pricing that passes interchange through. On interchange-plus, a cheaper category lowers your bill. On a flat rate, it doesn't.

The first two cost nothing to fix, so start there.

The next step

Pull last month's statement and look for interchange lines. If all you see is one rate, or three buckets, you can't check interchange at all. Send it to us for a free statement review and we'll match each line to the network schedule and work out your effective rate. Or see how our interchange-plus pricing works first.