Interchange Fees Definition
Interchange fees are charged to merchants by credit card networks for every credit or debit card transaction. Though credit card companies charge interchange fees, they are paid to the bank that issued the card to cover the risks, costs and potential fraud the card issuer can face during any card transaction.
Interchange fees vary by credit card network and by the type of transaction. Currently, the average credit card interchange fees range from 1.15% to 3.25%.
What are interchange fees?
Interchange fees are one of several fees that make up the total credit card processing fees charged to a merchant. Other fees can include payment processors fees and assessment fees, but interchange fees are the largest of these types of fees. Interchange fees are calculated as a percentage plus an additional fixed amount per transaction (for example: 1.580 % + 10¢).
The interchange fee depends on the rates set by the four different credit card networks: Visa, Mastercard, Discover and American Express. The interchange rates vary by each network and are set every April and October.
In addition to varying by credit card network, interchange fees will also vary based on the payment method. Any transaction that is made with an in-person card at the point of sale will usually have lower interchange fees than a transaction made with a card not present (such as with an online purchase). Debit cards will also typically have lower interchange fees than credit cards because the funds are verified immediately, so there is less risk than with a credit card transaction.
Interchange fee ranges by credit card network
The table below features the average interchange fees associated with each credit card network and is based on limited publicly available data.
Credit card network | Credit card interchange fee ranges |
|---|---|
| MasterCard | 1.35% + $0.00 % to 3.25% + $0.10 |
| Visa1 | 1.15% +$0.25 to 2.70% + $0.10 |
| Discover | 1.56% to 2.40% + $0.10 |
| American Express (for OptBlue merchants) | 1.43% to 3.0% + $0.10 |
How do interchange fees work?
The interchange fees in the above table include an average of both high and low end ranges. The fee you will pay varies based upon several factors, which include the following:
- Network: The four major credit card networks are American Express, Discover, Mastercard and Visa, and the interchange fees vary with each. The percentage rates with Visa and Mastercard may be lower than Discover or American Express, potentially resulting in a lower interchange fee.
- Card type: An interchange fee also varies depending on whether the card is a debit or credit card. Debit cards usually have a lower interchange rate than credit cards because they are considered lower risk. Business credit cards may have higher fees than consumer rewards credit cards. For example, Visa Business credit card has an interchange fee of 2.200 % + 10¢ while the Visa Rewards Traditional credit card has a fee of 1.650 % + 10¢.
- Method of payment: Credit card networks and banks charge retailers a swipe fee each time a consumer uses a debit or credit card to pay for a purchase. This means every swipe, dip, or tap affects the rates. There is also a cost difference between "card present" and "card not present." The fee for the Visa Retail Debit (card present) is 0.80% + $0.15 versus the Visa Retail Debit (card not present) with a fee of 0.65% + $0.15.
- Merchant category code (MCC): All vendors are assigned a merchant category four-digit code based on its type of business. This code also affects the interchange rate as those businesses considered to be higher risk, such as travel, can come with higher interchange fees.
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