Interchange Fees

After every credit or debit card transaction, businesses need to pay an interchange fee, also known as an interchange reimbursement fee or interchange rate. Many variables can affect the fee amount, and it can be difficult to determine how much the charges will be.

What Are Interchange Fees?

Every time a transaction is made via a card scheme (Visa, Mastercard, etc.), the acquirer pays the cardholder’s bank an interchange fee. The business then pays the interchange fee back as part of its card processing fees.

Payment card processing comes with three fees:

  1. Acquirer markup: Charged by the acquirer for acquiring the funds from your shopper.

  2. Card scheme fees: Charged by the card scheme for using its network.

  3. Interchange fee: Charged by the cardholder’s bank.

Interchange fees make up the most significant chunk of card processing fees.

How Much Are Interchange Fees?

On average, interchange fees are around 0.3-0.4% of the transaction amount in Europe and 2% in the US.

Card schemes determine interchange fees and are non-negotiable. They are also regularly adjusted. For example, Visa and Mastercard publish new rates in April and October every year.

The most accurate and up-to-date way to find the current rates is to check the card scheme’s website. Below you can find the interchange rates for Visa and Mastercard in different regions:

  • Visa interchange rates: EU, US, SG, AU, IN

  • Mastercard interchange rates: EU

Some card networks, including American Express and Discover, work slightly differently from Visa and Mastercard and don’t publish their rates online.

How Interchange Fees Are Calculated?

Many factors influence the interchange fee amount. Here are the key ones to be aware of and how they affect the amount you're charged:

  • Card scheme: Different card schemes charge different interchange rates. So, the cost of a customer paying with a Visa card won't be the same as with a Mastercard.

  • Card-present vs. card-not-present: Card-present (CP) transactions, also known as face-to-face transactions, have lower interchange fees than card-not-present (CNP) transactions. This is because the risk of fraud is lower when the customer’s card is physically present.

  • Credit vs. debit cards: Credit and deferred debit cards have higher interchange fees than immediate debit and prepaid cards as the level of risk is considered higher.

  • Merchant category code (MCC): Your assigned MCC can affect your interchange fees. For example, in the US and Australia, Visa and Mastercard grant lower rates to businesses like charities, travel agents, streaming services, and utilities.

  • Consumer vs. commercial: Commercial cards charge higher interchange fees than those issued to an individual.

  • Transaction regionality: Domestic transactions, where the card-issuing bank is in the same country as the business, are generally cheaper than cross-border transactions.

  • Rewards cards: If a customer uses a rewards card to pay, the interchange fees are generally higher. This is because the increased fees pay for the extras offered by rewards programs.

Can You Control Any of These Factors?

Some of the factors above you can influence, but others you can't change. For instance, if you convinced your customers to buy more in-store than online, you could reduce your interchange fees.

When it comes to your MCC, however, you have no control. Your MCC is assigned to you and is dependent on the type of business you have.

Lowering your interchange fees may not result in more profit. By limiting your customers' choices, you could deter them from purchasing from your business.