What is interchange, and why is it the biggest line on your statement?

Interchange is the fee the bank that issued your customer’s card earns each time that card is used at your business. It is set by the card networks, it is the same no matter which processor you use, and it is usually the largest single cost in accepting cards.

If you want to understand what is interchange and why your statement looks the way it does, start here. Every other fee on your statement sits on top of it.

Where interchange fits in a card payment

When a customer pays with a card, several parties touch the transaction. Each one gets a piece of the fee you pay. In plain English:

• The issuing bank gave your customer the card. It takes on the credit risk and fraud risk, and it earns interchange.
• The card network (Visa, Mastercard, Discover or American Express) runs the rails and charges assessments and network fees.
• Your processor and its acquiring bank move the money into your account and charge a markup for that service and support.

Interchange is the first piece and usually the biggest. The network fees are smaller. The markup is the only part that changes from one processor to another. Our guide to card network assessment fees covers the second piece in more detail.

What makes interchange go up or down

Interchange is not one rate. The networks publish long tables with hundreds of categories. The category a payment lands in depends on details about the card and the sale. These are the factors that matter most:

Factor	Usually costs less	Usually costs more
Card type	Regulated debit, basic credit	Rewards, premium and corporate cards
How the card is taken	Chip or tap in person	Keyed in or online
Business type	Categories like grocery or fuel often have their own rates	General categories with higher fraud risk
Data sent with the sale	Complete data, including Level 2 or 3 on business cards	Missing or partial data
Timing	Batches settled promptly	Late settlement, which can downgrade the rate

Two takeaways. First, you control some of these factors, like how you take cards and how quickly you settle. Second, you can’t control the card your customer hands you. A shop whose customers carry premium rewards cards will see a higher average interchange than a shop whose customers mostly use debit. Our guide on debit vs. credit processing costs shows why.

An example

Here is a simple, hypothetical illustration, not a real rate. Say two $100 sales come in on the same day. One is a basic debit card tapped at the counter. The other is a premium rewards credit card keyed in over the phone. The interchange on the second sale will typically be noticeably higher than the first, even though the sale amount is the same. Multiply that across a month of sales and your card mix becomes one of the biggest drivers of your cost.

Who sets interchange, and how often it changes

Visa and Mastercard publish interchange tables for cards on their networks. Discover and American Express run their own pricing programs. Processors don’t set these rates, and they can’t negotiate them for an individual merchant.

The networks review the tables on a regular schedule, often a couple of times a year. When rates change, they change for every processor at once. Debit cards from large banks are a special case: federal rules under the Durbin Amendment cap interchange on debit cards issued by large banks. Smaller banks and credit unions are exempt from that cap.

Interchange tables are long and they change. Treat any rate you read online as a snapshot, and check your own statement for what you are actually paying.

How interchange shows up on your statement

This depends on how your processor prices your account. On Interchange-Plus pricing, you see interchange listed at cost, often broken out by card type, with the processor’s markup on its own line. On flat-rate or tiered pricing, interchange is folded into a bundled rate, so you can’t see where it ends and the markup begins.

That difference matters. When interchange is bundled, you can’t tell whether a fee increase came from the card networks or from your processor. Our comparison of interchange-plus vs. flat rate vs. tiered walks through each model side by side.

What you can do about interchange

You can’t negotiate interchange, but you can make sure each payment earns the rate it should. A few practical steps:

1. Take cards in person by chip or tap whenever possible instead of keying them in.
2. Settle your batch every day so transactions don’t age into a higher category.
3. If you sell to other businesses, send Level 2 or Level 3 data on corporate and purchasing cards. That data can move a sale into a lower category.
4. For keyed or online sales, collect the billing ZIP code and card security code.
5. Ask for Interchange-Plus pricing so interchange is visible and you can spot downgrades.

None of these steps change the rate tables. They change which line of the table your payments land on.

What PayZoom does

PayZoom recommends Interchange-Plus pricing. Interchange and card-network fees pass through at cost, and our margin sits on its own line, as low as 0.05% + $0.22 per transaction, depending on your setup. For Interchange-Plus merchants, that margin never increases, and that is in writing. Send us one recent statement for a free statement analysis and we’ll show you how much of what you pay is interchange and how much is markup. Learn more about our credit card processing.