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A Quick Overview of Interchange

When you first research finding a payment processor for your business, you’re going to hear the term “interchange” frequently. 

This is a term that you likely have not heard before and may not be familiar with. So, what exactly is interchange? Interchange refers to the standard fee that is charged by the card brand (Visa, MasterCard, Discover, or Amex) for processing a credit card transaction.

Each credit card transaction has a base fee that is charged to you, the merchant, by the cardholder’s bank (issuing bank), and will vary for each transaction based on a variety of factors. Because we pride ourselves on transparency, we provide a breakdown of the different interchange rates on our pricing page so you can view the different interchange rates specific to your industry and business type.   

What is the Interchange rate?

Interchange isn’t just one rate, there are actually hundreds of varying rates that could apply to a given transaction based on different factors such as what kind of credit card the customer uses, how the transaction is processed (card present versus online), and what kind of business you are. These factors will impact which rate you are charged. For example, swiping a credit card or using the chip will result in a lower rate than if you were to manually enter the card information on a website. The type of business you run can also affect the rate. For example, charities are eligible for lower interchange rates than restaurants are. Finally, customers get to choose from a wide variety of different types of credit cards, customers who choose a basic cashback card will have a lower interchange rate than customers who are using privilege or travel rewards cards.

When does the Interchange Fee Apply?

The interchange fee will apply each time you process a credit card transaction. The fee that the processor will charge your business includes an interchange fee, a card brand fee, and their margin in each transaction that you process. For more details on these fees check out our article on Interchange Plus Pricing vs Flat Rate Pricing.

Why do I need to know what it is?

Understanding the interchange rate, how it is applied, and how it can vary can help you make sense of your processing statement each month. Knowing more about the payment processing industry, in general, can help you advocate for your business and understand the service that processors are offering.

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