What Is Interchange? (And How It Affects Your Card Fees)

Interchange fees are charges set by the card schemes (like Visa and Mastercard) and paid by your merchant service provider to the cardholder’s bank (also known as the issuing bank).

Think of it like a fee the cardholder’s bank charges every time their customer makes a purchase with their card. This fee is then passed down the chain — and ultimately becomes part of what you pay in transaction fees.

📌 Quick breakdown:

• Cardholder pays £100 by card

• You, the merchant, receive £98.00 (after fees)

• The cardholder’s bank receives interchange (e.g. £0.30–£1.00)

• The rest goes to the card scheme and your provider

Interchange fees are set by Visa, Mastercard, and other card schemes like Amex, Discover, and UnionPay. These fees are not set by your merchant provider — they’re industry standard, although some providers apply extra margins on top.

In the UK and EU, interchange fees are capped by regulation for consumer cards:

• 0.2% for debit cards

• 0.3% for credit cards

However, there are no caps on:

• Commercial or business cards

• Non-UK/EEA issued cards

• Certain types of cross-border payments

Interchange is one of the core building blocks of the total Merchant Service Charge (MSC) you pay per transaction.

Your card processing cost is usually made up of:

1. Interchange fee (paid to the cardholder’s bank)

2. Scheme fee (paid to Visa/Mastercard etc.)

3. Acquirer/PSP margin (your provider’s fee)

💡 Example (UK Visa Debit):

• Interchange: 0.2%

• Scheme fee: 0.05%

• Provider margin: 0.3%

• Total fee to you: 0.55%

These fees are often bundled into one simple rate, but behind the scenes, this is how the costs are broken down.

There are two main types of pricing model:

✅ Blended Pricing

• One flat % per transaction (e.g. 1.75%)

• Easy to understand

• Interchange is hidden within the fee

✅ Interchange Plus (IC+) Pricing

• You see actual interchange + scheme fee + provider margin

• More transparent

• Better for high-volume or larger businesses

📌 Tip: If you process over £10,000/month in card payments, IC+ pricing may save you money — but only if your provider passes on the true interchange rates without mark-ups.

Interchange isn’t always the same — it varies based on several factors:

• 💳 Card type: Debit, credit, commercial, premium

• 🌍 Card origin: UK, EEA, international

• 🛒 Payment method: In-store (chip & PIN) vs online (CNP)

• 🧾 Transaction type: Refunds, pre-auths, etc.

• 🧪 Security level: 3D Secure, PCI DSS compliance