Interchange fees explained

Confused by how interchange fees are calculated? Learn how interchange rates work for different credit and debit cards and how they vary from country to country.

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.

In this article, we’ll walk you through the factors that impact interchange fees, where you can find the most up-to-date interchange rates, and the regulations that exist to ensure you’re paying a fair price.

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.

diagram of how interchange fees pass through the acquiring bank and card scheme before reaching the issuing bank

Payment card processing comes with three fees:

  • Acquirer markup: Charged by the acquirer for acquiring the funds from your shopper
  • Card scheme fees: Charged by the card scheme for using its network
  • 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, US, AU

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

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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.

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Interchange++ vs. Blended pricing

Interchange++ (or Interchange Plus Plus) and Blended are the most widely used pricing models for card transactions. The main difference between the two is transparency.

Interchange++ shows you a detailed breakdown of the three payment card costs mentioned earlier: the acquirer markup, card scheme fee, and interchange fee.

You only pay the interchange fee the card issuer actually charged you. As interchange fees vary depending on many factors, they can sometimes be lower than a fixed rate.

The alternative to Interchange++ is Blended pricing. The Blended model charges an average processing cost plus a fixed markup. You're charged the same markup for every transaction, and you can't see the split of the costs.

This makes it easy to understand, but intransparent. And there's no guarantee your processor will share any savings with you made from lower interchange fees.

Chart illustrating blended vs interchange++ pricing

How interchange fees can vary per transaction

Interchange fees regulation

Traditionally, there was very little transparency into how interchange fees were calculated. Large businesses with a high volume of transactions could negotiate lower fees, while smaller firms had to pay the full amount.

Markets dominated by the large international card schemes were most vulnerable. Businesses couldn't afford to refuse the payment methods most of their customers used.

Fortunately, recent progress has been made to standardize interchange fees, with stricter rules and fee caps introduced, and overall transparency increased.

Below is a breakdown of the fees caps across different regions:

Map displaying interchange fees caps around the world

Note: US credit is unregulated, and US debit applies to regulated banks only. Fee caps only apply to consumer cards in the US and EEA. In Mexico, caps depend on the industry, and some rates are negotiable.

The Durbin Amendment (US only)

This amendment, enacted in 2010, is an example of a fee cap for debit and prepaid card transactions.

The Durbin amendment is dependent on the size of the issuing bank's assets. If the issuing bank has assets of $10bn or more, its debit and prepaid cards will be charged regulated rates. These cards are then subject to an interchange rate of 0.05% + $0.21 or 0.05% + $0.22, depending on fraud prevention policies.

European Interchange Fee Regulation

The European Economic Area (EEA) introduced interchange fee regulation in 2015. This led to the heavy regulation of interchange fees and made the EEA one of the cheapest options worldwide.

Interchange fees are capped for consumer cards in all EEA regions, making it a good place to set up an entity for cross-border transactions. The precise caps are as follows:

Regionality caps Debit Credit
Domestic 0.20% 0.30%
Intra-regional 0.20% 0.30%
Interregional card-present 0.20% 0.30%
Interregional card-not-present 1.15% 1.50%

Still want to learn more?

Find out how Adyen can help you track ever-changing interchange rates and regulations.

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