What Are Credit Card Interchange Fees?
Last updated 05/27/2026 by
Ante Mazalin
Edited by
Andrew Latham
Summary:
Credit card interchange fees are per-transaction fees paid by a merchant’s bank to the cardholder’s issuing bank each time a customer completes a credit card purchase.
These fees fund cardholder rewards programs and fraud protections, but ultimately influence the prices consumers pay.
- Who pays: The merchant’s acquiring bank deducts the interchange fee before passing transaction proceeds to the retailer.
- Typical rate: U.S. interchange rates average 1.5% to 3.5% of the transaction amount, varying by card network, card type, and merchant category.
- Rewards cards cost more: Premium rewards and travel cards carry higher interchange rates than basic debit or no-rewards credit cards.
- Who sets the rates: Visa and Mastercard set interchange schedules; American Express and Discover operate differently as both network and issuer.
Interchange fees are largely invisible to consumers at the point of sale. Still, they shape the economics of credit card rewards, merchant pricing, and the cost of accepting card payments for businesses of every size. Understanding how they work explains why premium rewards cards exist and why some small merchants offer cash discounts.
How Interchange Fees Work
Every time you swipe, tap, or enter a credit card number, a chain of parties processes the transaction, and interchange is the fee that flows between two of them: the merchant’s bank (the acquirer) and your card-issuing bank.
The flow of a typical credit card transaction:
- You pay for a $100 purchase with your credit card.
- The merchant’s payment terminal sends the transaction to its acquiring bank.
- The acquiring bank routes the transaction through the card network (Visa, Mastercard, etc.) to your issuing bank for authorization.
- Your issuing bank approves the transaction and funds it.
- At settlement, the merchant receives the transaction amount minus the interchange fee and the acquirer’s markup.
- On a 2% interchange rate, the merchant receives $98, and your bank keeps $2.
The card network charges a separate fee to both banks for using its rails. The total cost a merchant pays per transaction is called the merchant discount rate, which bundles interchange, network fees, and the acquirer’s margin.
What Determines the Interchange Rate?
Visa and Mastercard publish detailed interchange schedules that vary by dozens of criteria. The primary factors that move rates up or down include:
- Card type: Rewards cards, premium travel cards, and corporate cards carry higher interchange than basic consumer cards or debit cards.
- Merchant category code (MCC): Supermarkets, utilities, and government agencies often receive lower interchange rates because they process high volumes or serve public functions. Luxury retailers and airlines typically pay standard or higher rates.
- Transaction method: Card-present transactions (chip or contactless) carry lower fraud risk and lower interchange than card-not-present transactions (online purchases), where fraud rates are higher.
- Card network: American Express historically charges higher effective rates than Visa and Mastercard because it acts as both issuer and network, capturing more of the transaction economics.
| Card Type: Typical | l U.S. Interchange Rate |
|---|---|
| Basic consumer credit card | 1.51% to 1.80% |
| Rewards credit card | 1.65% to 2.40% |
| Premium travel credit card | 2.10% to 2.65% |
| Corporate card | 2.20% to 2.95% |
| Regulated debit card (Durbin Amendment) | Capped at $0.21 + 0.05% |
Source: Visa and Mastercard published interchange rate schedules, updated periodically.
Who Actually Pays Interchange Fees?
Interchange is formally paid by the merchant’s acquiring bank, which deducts it before paying the retailer. In practice, merchants build the cost of card acceptance into their prices, which means cardholders and cash customers alike pay for it through slightly higher prices across the economy.
The Merchant Payments Coalition, a retail industry group, estimates that U.S. merchants collectively pay more than $100 billion in card acceptance fees annually, with interchange representing the largest component. Small businesses are disproportionately affected because they lack the negotiating leverage that large retailers use to secure custom interchange rates from networks.
Pro Tip: Some states and retailers now surcharge credit card transactions at the point of sale, passing interchange costs directly to cardholders who choose to pay by card. If you see a credit card surcharge, paying with cash or a debit card avoids the extra cost. Surcharges are prohibited on debit cards under Visa and Mastercard network rules.
The Connection Between Interchange and Rewards Programs
Interchange revenue is the primary source of funding for credit card rewards programs. Issuers collect interchange on every transaction, then return a portion to cardholders as cash back, points, or miles. The higher the interchange on a given card, the more generous the rewards the issuer can afford to offer.
This creates a structural dynamic: premium rewards credit cards with high interchange rates are subsidized by the merchants where cardholders spend. Merchants pay more to accept a Sapphire Reserve than a basic Visa, and part of that extra cost funds the cardholder’s points and travel benefits.
It also explains why issuers promote premium cards aggressively. A card earning 3x on dining with a $95 annual fee generates far more interchange revenue than a no-fee 1% card, enabling the issuer to fund the rewards while still earning a margin.
Interchange Regulation in the United States
The Durbin Amendment, passed as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, capped debit card interchange fees for banks with assets exceeding $10 billion. The Federal Reserve set the cap at $0.21 per transaction plus 0.05% of the transaction value.
Credit card interchange has not been subject to the same federal cap, and U.S. rates are significantly higher than those in other developed markets. The European Union capped consumer credit card interchange at 0.3% under the 2015 Interchange Fee Regulation, compared to U.S. averages of 1.5% to 2.5%. This gap partly explains why credit card rewards programs are far more generous in the U.S. than in Europe.
As of 2025, legislative efforts to extend Durbin-style caps to credit cards, such as the Credit Card Competition Act, remained under debate in Congress but had not been enacted.
How Interchange Affects Merchants and Consumers
For merchants, interchange is the cost of accessing card payment infrastructure and the consumer base that uses cards. High-volume retailers like Amazon and Walmart negotiate custom rates that can fall below published schedules. Small businesses pay full published interchange rates, which can erode margins significantly in low-margin industries like grocery retail or fuel sales.
For consumers, the effects are indirect. Research published by the Federal Reserve Bank of Boston found that cash-paying consumers effectively subsidize rewards cardholders because merchants price interchange costs into goods and services equally for all customers, while only credit cardholders receive rewards in return.
This is one argument for using a cash-back credit card for everyday purchases: you are recapturing a portion of the interchange built into prices that you would pay regardless of how you pay.
Interchange vs. Other Merchant Fees
Interchange is often confused with the total cost a merchant pays to accept cards. The full cost structure includes three components:
- Interchange: Paid to the issuing bank. The largest component is set by card networks.
- Assessment fees: Paid to the card network (Visa, Mastercard). Typically 0.13% to 0.15% per transaction.
- Processor markup: Paid to the acquirer or payment processor. Varies widely based on the processor, pricing model, and merchant volume.
A merchant on a flat-rate processor like Square pays 2.6% plus $0.10 per transaction. Of that, roughly 1.8% is interchange and assessment, and the remainder is Square’s margin. Larger merchants on interchange-plus pricing see each component itemized separately on their monthly statements.
Key takeaways
- Interchange fees flow from the merchant’s bank to the cardholder’s issuing bank on every credit card transaction.
- U.S. rates average 1.5% to 3.5% of the transaction, depending on card type, merchant category, and transaction method.
- Premium rewards and travel cards carry higher interchange rates, which fund the cash back and points programs those cards offer.
- Visa and Mastercard set interchange schedules; American Express and Discover integrate the issuer and network functions, capturing fees differently.
- Debit card interchange is federally capped under the Durbin Amendment; credit card interchange is not regulated at the federal level in the U.S.
- Merchants embed interchange costs into prices, meaning all customers pay indirectly whether or not they use a rewards card.
Frequently Asked Questions
Do consumers pay interchange fees?
Not directly. Interchange is paid by the merchant’s bank to the cardholder’s issuing bank. However, merchants build card acceptance costs into their prices, so consumers pay indirectly through slightly higher prices on goods and services regardless of how they pay.
Why are interchange fees higher in the U.S. than in Europe?
The European Union capped credit card interchange at 0.3% under the 2015 Interchange Fee Regulation. The U.S. has no equivalent cap for credit cards, so market rates of 1.5% to 2.5% prevail. This difference also explains why U.S. rewards programs are far more generous than European ones.
Can merchants charge extra for credit card payments?
In most U.S. states, merchants are permitted to surcharge credit card transactions up to 4% or the actual interchange cost, whichever is lower. Surcharges are prohibited on debit cards. Some states have additional restrictions, and surcharging rules vary by card network contract. Always check the specific disclosure at point of sale.
Does the type of credit card affect how much merchants pay?
Yes. Premium travel cards and corporate cards carry higher interchange rates than basic consumer cards. A merchant accepting an American Express Platinum card pays a higher effective rate than accepting a no-rewards Visa. This is why some small merchants historically declined certain premium cards or American Express.
Learn More About Credit Card Costs
Interchange fees are one layer of a broader payment processing ecosystem. These resources break down the full cost picture for both cardholders and merchants.
- SuperMoney’s Credit Card Industry Report tracks interchange rate trends and how issuer pricing has shifted across card networks.
- Merchant Discount Rate is the total fee merchants pay per transaction — interchange is its largest component.
- Payment Processing Fees covers how acquirers, processors, and networks each take a cut before funds reach a merchant’s account.
- Compare credit cards side by side at SuperMoney’s credit card reviews to find options with rewards structures that offset interchange-driven costs.
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