Interchange fee
Also called interchange, interchange rate.
The fee the merchant's bank pays the card-issuing bank on each card payment, usually the largest part of what a merchant pays to accept cards.
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What it is.
When a customer pays by card, the merchant's bank (the acquirer) pays a fee to the bank that issued the card. Card networks such as Visa and Mastercard publish the rate tables. Rates depend on things like card type, debit or credit, the country, the merchant category and whether the card was present.
Some places cap interchange by law. In the US, the Federal Reserve's Regulation II limits debit card interchange for large issuers, with certain small issuers exempt. The merchant does not usually pay interchange directly. It is built into what the payment provider charges.
Why it matters
Interchange sets the floor on card costs, so it shapes pricing for marketplaces, subscription products and fintech apps. Some products, such as card issuing programmes, earn a share of interchange, which makes it revenue rather than cost.
In a product build
We store the fee breakdown each payment provider returns for every charge, not just the total, so finance can reconcile and compare providers. Fee logic lives in one place, and card data stays with the provider to keep PCI scope small.
Common mistakes.
- 01
Modelling card costs as one flat percentage when most of the cost varies by card.
- 02
Confusing interchange with the provider's markup when comparing quotes.
- 03
Ignoring cross-border and premium card rates when selling abroad.
Read the official text.
Primary sources this definition is based on.
- Federal Reserve, Regulation II (Debit Card Interchange Fees and Routing)checked 2026-10-25
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Related terms.
- Cardholder data environment (CDE)The people, processes and systems that store, process or transmit payment card data, plus the systems connected to them.
- WebhookAn HTTP request one system sends to a URL you choose as soon as an event happens, so you do not have to keep asking.
- IdempotencyThe property of an operation that has the same effect whether it runs once or several times, so it is safe to retry.
- Total cost of ownership (TCO)Everything a piece of software costs over its life, not just the price to build or buy it.
- Headless commerceAn e-commerce setup where the shop front (the head) is built separately from the commerce engine that handles products, carts and orders, linked by APIs.
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