Interchange fees are the per-transaction charges that a merchant’s bank pays to a cardholder’s bank every time someone pays with a credit or debit card. The card networks — Visa, Mastercard, and others — set the rates, the issuing bank keeps the money, and the merchant ultimately absorbs the cost as part of the price of accepting cards. Across the United States, these fees totaled more than $111 billion in 2024, which makes them one of the largest operating expenses for any business that takes card payments.
How the Fee Moves Through a Card Transaction
Every card sale involves four parties: the cardholder, the merchant, the issuing bank (the cardholder’s bank), and the acquiring bank (the merchant’s bank). When a card is swiped, tapped, inserted, or entered online, the acquiring bank routes the transaction through the card network to the issuing bank for approval. Once approved, the issuing bank sends the funds to the acquiring bank, minus the interchange fee, which the issuing bank keeps.1Visa. Credit Card Processing Fees and Interchange Rates
The merchant doesn’t see interchange as a separate line item. The acquiring bank bundles it with its own markup and the network’s assessment fees into a single charge called the merchant discount rate. Total card-processing costs for most businesses fall between 2% and 3.5% of each sale, and interchange is the largest slice of that.
Online sales add a payment gateway to the chain. The gateway encrypts the card data and passes it to the acquiring bank, then charges its own fee on top of interchange and the acquirer’s markup. That’s part of why online merchants generally pay more per transaction than physical stores.
What Makes One Transaction Cost More Than Another
There is no single interchange rate. A single merchant can pay dozens of different rates in a month, depending on how customers pay and what they buy.
Card Type
Premium rewards cards — cash back, airline miles, hotel points — carry higher interchange than plain consumer cards. The issuing bank funds the rewards partly from the higher fee it collects on the merchant side. Corporate and commercial purchase cards also tend to sit at elevated rates compared with basic consumer debit or credit.
Merchant Category Code
Every business is assigned a four-digit Merchant Category Code that identifies what it sells. Card networks use MCCs to sort transactions into pricing tiers, so a grocery store, a gas station, and a restaurant each face different baseline rates.2Mastercard. Quick Reference Booklet – Mastercard A code in a higher-risk category generally means a higher fee on every sale.
Card-Present Versus Card-Not-Present
Whether the physical card is present at the sale changes the rate considerably. In-store transactions where the card is swiped, dipped, or tapped are cheaper because chip and contactless verification reduce fraud. Online and phone orders — card-not-present — carry more risk and cost more. A basic Visa debit card swiped in a store might run about 0.80% plus $0.15, while the same card used online for an exempt issuer could be roughly 1.65% plus $0.15.
Security Tools
Merchants that use fraud-prevention tools can qualify for lower rates. Address Verification Service, which checks that the billing address a customer enters matches the one on file with the issuing bank, is a common one. Visa offers lower card-not-present rates when AVS is used, a difference that can approach half a percentage point.
Level 2 and Level 3 Data for B2B Sales
Merchants selling to other businesses or to government buyers can reduce interchange by sending extra transaction data. Card networks recognize three tiers:
- Level 1 is the default: the transaction amount and date.
- Level 2 adds sales tax, a customer reference or purchase order number, and the merchant postal code, and qualifies for a reduced rate on its own.
- Level 3 adds line-item detail equivalent to an itemized invoice — product descriptions, quantities, and unit costs — for the lowest available commercial rates.
The savings scale with ticket size. On a $10,000 purchase-card transaction, submitting Level 3 data instead of Level 1 can save $50 or more. Visa, Mastercard, and American Express all reduce interchange for Level 2 and Level 3 data; Discover does not participate.
Who Sets the Rates
Visa and Mastercard set interchange rates for their networks. Neither keeps the money — the fee flows between the issuing and acquiring banks — but the networks publish the schedules that all member banks follow.1Visa. Credit Card Processing Fees and Interchange Rates Centralized rate-setting keeps thousands of banks from negotiating separate fees for every transaction type.
Both networks update their schedules twice a year, in April and October.3Visa. Visa USA Interchange Reimbursement Fees The published tables contain hundreds of rate combinations. Visa breaks its schedule down by consumer credit, consumer debit, commercial, and prepaid, and further by industry and transaction size, with categories ranging from small-ticket purchases under $5 to large-ticket transactions above $1 million.4Mastercard. 2025-2026 U.S. Region Interchange Programs and Rates
What Federal Law Regulates
Federal law caps interchange on some debit card transactions. It does not cap credit card interchange at all.
The Durbin Amendment and the Debit Cap
The Durbin Amendment, part of the Dodd-Frank Act of 2010, directs the Federal Reserve to make sure debit interchange fees are “reasonable and proportional to the cost incurred by the issuer.”5Office of the Law Revision Counsel. 15 USC 1693o-2 – Reasonable Fees and Rules for Payment Card Transactions Under the Federal Reserve’s Regulation II, banks with $10 billion or more in consolidated assets face a maximum debit interchange fee of 21 cents plus 0.05% of the transaction, with an additional 1-cent adjustment available to issuers meeting the Fed’s fraud-prevention standards. On a $50 debit purchase at a covered bank, that works out to roughly 24.5 cents.
The Federal Reserve proposed lowering the cap in 2023 to 14.4 cents plus 0.04%, with a 1.3-cent fraud adjustment and biennial updates.6Federal Register. Debit Card Interchange Fees and Routing That proposal has not been finalized as of early 2026, so the 21-cent cap still applies.
The Small-Bank Exemption
Banks and credit unions with less than $10 billion in assets are exempt from the cap.5Office of the Law Revision Counsel. 15 USC 1693o-2 – Reasonable Fees and Rules for Payment Card Transactions Exempt issuers can charge more, and they do. Federal Reserve data show the average interchange on exempt debit transactions was $0.58 in 2023, compared with $0.23 for regulated transactions at covered issuers.7Federal Reserve Board. 2023 Interchange Fee Revenue, Covered Issuer Costs, and Covered Issuer and Merchant Fraud Losses Related to Debit Card Transactions
Credit Cards Sit Outside the Cap
The Durbin Amendment covers only electronic debit. Credit card interchange is set entirely by the networks and issuing banks, with no federal ceiling, and credit rates regularly exceed 2% of the transaction. Some issuers have responded to the debit cap by pushing richer rewards on credit cards, which the unregulated credit interchange helps fund.
Routing Choice on Debit
Durbin also requires that every debit card work on at least two unaffiliated networks — for example, Visa plus an independent PIN-debit network — and bars networks from stopping merchants from picking which available network processes a given transaction.5Office of the Law Revision Counsel. 15 USC 1693o-2 – Reasonable Fees and Rules for Payment Card Transactions The Credit Card Competition Act, reintroduced in the 119th Congress as S.3623, would extend a similar routing-choice rule to credit cards issued by banks with more than $100 billion in assets.8Congress.gov. S.3623 – Credit Card Competition Act of 2026 It has not been enacted.
How Merchants Pass Interchange to Customers
Two approaches are common, and the rules governing each are different.
A credit card surcharge is an extra fee added at checkout for paying with a credit card. Federal law allows surcharging on credit but prohibits it on debit.5Office of the Law Revision Counsel. 15 USC 1693o-2 – Reasonable Fees and Rules for Payment Card Transactions Some states, including Connecticut, Massachusetts, and Maine, restrict or prohibit surcharges outright. Card networks add their own rules on top: Mastercard requires 30 days’ advance notice to the network and the acquirer, disclosure at the store entrance, at the register, and on the receipt, and caps the surcharge at 4% or the merchant’s actual cost of acceptance, whichever is lower.9Mastercard. What Merchant Surcharge Rules Mean to You
A cash discount is the reverse: the advertised price is the card price, and customers who pay in cash get a lower price. Federal law protects the merchant’s right to offer a cash discount, and networks can’t penalize a business for doing so.5Office of the Law Revision Counsel. 15 USC 1693o-2 – Reasonable Fees and Rules for Payment Card Transactions The discount has to be available to all customers and clearly posted, and because the higher price is the default, the approach sidesteps the surcharge restrictions in states that impose them.
How Interchange Shows Up on a Merchant’s Bill
What a merchant actually pays depends on the processor’s pricing model. Three structures are common.
Interchange-plus pricing passes the exact interchange rate for each transaction straight through, then adds a fixed markup, for example 0.3% plus 10 cents. It’s the most transparent option and usually the cheapest at moderate to high volume, which is why most large U.S. merchants use it.
Tiered pricing sorts transactions into a few broad buckets, typically “qualified,” “mid-qualified,” and “non-qualified,” each with a set rate. The processor decides which bucket a transaction lands in. It looks simple on a statement but often costs more, because low-interchange transactions can end up billed at a higher tier.
Flat-rate pricing charges one predictable percentage on every sale regardless of card type, such as 2.6% plus 15 cents for in-person transactions. It’s popular with small businesses because there’s nothing to interpret, and the trade-off is that the flat rate is set high enough to cover the most expensive interchange categories. Merchants with high volume or low-risk transaction profiles can end up paying more than they would on interchange-plus.