Interchange fees are the fees paid by the merchant's acquiring bank to the customer's issuing bank on every card transaction. They are set by the card networks (Visa, Mastercard, Discover, and American Express) and represent the largest single cost in payment processing — typically 70–85% of total processing fees.
Interchange rates are not negotiable by merchants or processors. They are published twice yearly (in April and October) by each card network and vary based on dozens of factors including: card type (debit vs. credit, rewards vs. basic, business vs. consumer), transaction type (card-present vs. card-not-present), merchant category code (MCC), and transaction size.
The rationale for interchange is that the issuing bank bears the risk of extending credit and the cost of rewards programs. Rewards cards (like travel miles and cash back cards) carry higher interchange rates than basic cards because the issuing bank uses interchange revenue to fund those rewards.
There are over 300 different interchange categories in the Visa and Mastercard rate tables. Under interchange plus pricing, merchants see exactly which category each transaction falls into and what rate applied. Under tiered pricing, these categories are hidden behind "qualified," "mid-qualified," and "non-qualified" buckets.
The Durbin Amendment (2011) capped debit card interchange for large banks at $0.21 + 0.05% per transaction — much lower than credit card rates. This is why debit card processing is significantly cheaper than credit card processing.
Interchange fees are the floor cost of card acceptance — you cannot negotiate them away. What you can do is minimize them by: (1) accepting cards in the most favorable environment (card-present is cheaper than card-not-present), (2) providing complete transaction data to avoid downgrades, (3) batching daily, and (4) accepting debit when possible.
Understanding which interchange categories your transactions land in helps you identify where you're losing money to unnecessary downgrades. A B2B company that doesn't provide level 2 data may be paying commercial card rates of 2.65% instead of the level 2 rate of 1.90%.
A retail merchant processes a $500 corporate Visa card purchase: - Standard corporate interchange rate: 2.65% + $0.10 = $13.35 - With level 2 data provided: 1.90% + $0.10 = $9.60 - Savings from providing level 2 data: $3.75 on this single transaction Across dozens of corporate card transactions monthly, these savings add up quickly.
The customer's issuing bank (the bank that issued their credit or debit card) receives the interchange fee. Visa and Mastercard set the rates but do not keep the interchange — they collect separate assessment fees.
Interchange rates are complex because risk and cost vary enormously across transaction types. A card-present debit transaction has very little fraud risk; a card-not-present corporate rewards card has significant fraud risk and high reward funding costs. The 300+ rate categories reflect these differences.
Yes. Visa and Mastercard publish their interchange tables publicly on their websites. Under interchange plus pricing, your statement shows which rate category each transaction fell into. Under tiered pricing, this information is hidden.
Yes, card networks update interchange rates twice per year — in April and October. These changes are announced in advance. Under interchange plus pricing, your rates adjust automatically; under flat-rate pricing, your processor may or may not pass changes along.
Liberty Bancard passes interchange fees directly to you at cost — no markup on the interchange itself. Our only compensation is our fixed processor markup, which we disclose on every statement. This interchange transparency is what saves our merchants an average of $300–$800/month.
See your current interchange costs broken down in our free statement analysis.
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