Who sets interchange rates?

The card networks set interchange rates. Visa, Mastercard and the other networks publish the rate tables, the customer’s issuing bank collects the fee on each sale, and federal rules cap interchange on debit cards from large banks.

Your processor doesn’t set interchange and can’t change it. That matters, because it tells you which part of your processing cost you can actually negotiate. For the basics of what interchange is and why it’s usually the biggest line on your statement, start with what is interchange. This guide focuses on who decides it.

The card networks write the rate tables

Visa and Mastercard don’t issue cards themselves. They run the networks that connect thousands of issuing banks with millions of businesses. Each network publishes its own interchange schedule: a long table of rates, often a percentage plus a fixed cents amount, sorted into categories.

The category a sale lands in depends on details like these:

• Card type. Basic credit, rewards credit, debit, prepaid, business, corporate or purchasing card.
• How the card was taken. Chip or tap in person usually costs less than a card number typed into a website or over the phone.
• Business category. Some industries, such as grocery, fuel or utilities, have their own rate programs.
• Data sent with the sale. Business cards can qualify for lower rates when extra data, called Level II and Level III data, is passed along.
• Timing. Sales settled late can fall into a more expensive category.

The networks set these rates to balance two groups: the banks that issue cards and want income to fund rewards and cover fraud, and the businesses that accept cards and want lower costs. The networks update their tables periodically, often a couple of times a year.

Because there are so many categories, two customers buying the same item on the same day can cost you very different amounts. One pays with a basic debit card tapped at the counter. The other pays with a corporate rewards card read over the phone. Same price, same processor, different interchange. That’s normal, and it’s why an average rate on its own doesn’t tell you much.

The issuing bank receives it

Interchange is paid to the bank that issued your customer’s card. It covers the issuer’s cost of fraud, credit risk and moving the money, and it funds rewards programs. That’s why a premium travel card usually costs you more to accept than a basic debit card. The issuer is paying for the points, and interchange is part of how.

American Express and Discover work a little differently. Each has historically acted as both network and card issuer for many of its cards, so pricing for those brands is set within their own programs. Most small and mid-size businesses accept them through their processor. See accepting American Express for how that typically works.

Where government rules come in

Most interchange is set by the market, not by law. The main exception in the U.S. is debit. Federal rules cap interchange on debit cards issued by banks above a certain asset size. These are known as regulated debit cards. Cards from smaller banks and credit unions are exempt and usually carry higher interchange.

The rules also touch other areas, such as which networks a debit card must be able to route through. Specifics change over time, so treat any exact figure you read with care and check the current version. Our guide to regulated vs. exempt debit explains how the difference shows up on a statement.

Who controls what: a quick map

Here’s how the pieces of a typical card transaction fee break down, and who has a hand on each one.

Part of the fee	Who sets it	Who keeps it	Negotiable?
Interchange	Card networks (and federal rules for large-bank debit)	Issuing bank	No
Card-network fees	Card networks	Card networks	No
Processor markup	Your processor	Your processor	Yes
Monthly and add-on fees	Your processor	Your processor	Yes

Card-network fees, sometimes called assessments, are separate from interchange and are kept by the networks themselves. We break them down in card network assessment fees.

What you can influence

You can’t change the rate tables, but you have more influence over your interchange cost than most businesses realize. A few practical steps:

1. Take cards in person with chip or tap whenever you can, instead of keying in numbers.
2. Close your batch daily so sales settle on time.
3. Pass Level II and Level III data if you sell to other businesses or government buyers.
4. Use address and security-code checks on keyed and online sales.
5. Ask for Interchange-Plus pricing, so you can see interchange separately from the processor’s markup.

Some businesses also offset card costs with a compliant surcharge program or a cash discount. Those don’t change interchange, but they change who pays for it. Card-brand rules apply, so set them up carefully.

The last step is the big one. When a processor bundles interchange and markup into one rate, a network rate change becomes an easy moment to raise prices quietly. When they’re separate, you can see whether a change on your statement came from the networks or from your processor.

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. For Interchange-Plus merchants, our margin above interchange never increases, in writing. When the networks change their tables, you see the network change and nothing extra from us.

We also help B2B and government merchants qualify for lower interchange categories with Level II and Level III processing. Send us a recent statement for a free statement analysis, and a real person will show you which of your costs are interchange and which are markup.