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Interchange, explained plainly.
Every card payment you take has three costs inside it. Two of them are the same whoever processes your cards. The third is the one that's actually negotiable. Here's what each one is, and how to see them on your statement.
The three parts
Where does a card fee go?
Every card fee splits three ways. Interchange, the largest part, goes to the bank that issued your customer's card. Network fees go to the card brand. The processor's margin goes to your processor, and it's the one part that changes with who processes your cards, so it's the part worth comparing.
- Interchange
- The largest part. It's paid to the bank that issued your customer's card. Visa describes interchange as transfer fees between the merchant's bank and the card's bank, and publishes its US rates (Visa).
- To the card's bank
- Network fees
- Also called assessments. A small percentage, and sometimes a few cents, charged by the card brand on each payment.
- To the card network
- Processor margin
- The markup your processor adds on top. On interchange-plus pricing it's typically about 0.25% for retail and 0.35% for e-commerce (CardFellow).
- To your processor
Why it varies
Why does the same sale cost different amounts?
Because interchange depends on the card and how it was taken. Rewards and business cards cost more than basic debit cards, and a card keyed in or paid online costs more than one dipped or tapped in person. Your rate is a mix that shifts with the cards your customers carry each month.
Interchange depends on the card and how it was taken. Rewards and business cards cost more than basic debit cards. A card keyed in or paid online costs more than one dipped or tapped in person, because the risk of fraud is higher.
Debit cards from large banks have their interchange limited by the Federal Reserve under Regulation II; certain smaller issuers are exempt (Federal Reserve). That's one reason a month with more debit payments can cost less.
So your rate isn't one number. It's a mix, and the mix changes with your customers.
Two ways to be charged
What's the difference between interchange-plus and a flat rate?
On interchange-plus, the card's real cost is passed through and the processor's margin is a separate line you can check. A flat rate bundles everything into one percentage that has to cover the most expensive cards, so it usually sits above the average cost and hides how much of it is margin.
Interchange-plus (pass-through)
- Interchange and network fees are passed through at what they actually cost.
- The processor's margin is a separate, stated line.
- When a payment costs less, you pay less. You can check every line.
A flat rate (bundled)
- One percentage, often plus a fixed fee, for every payment.
- It has to cover the most expensive cards, so it sits above the average cost.
- You can't see how much of it is margin.
A worked example
One $1,000 invoice, paid online by card.
Illustrative. Interchange varies by card. The margin is the typical e-commerce markup of about 0.35% (CardFellow).
| Line | Amount |
|---|---|
| Interchange and network fees, say 1.90% + 10¢ | $19.10 |
| Processor margin, about 0.35% | $3.50 |
| Passed through: 2.26% effective | $22.60 |
| Bundled at 2.9% + 30¢ | $29.30 |
2.26% sits inside the 2.10–2.40% a small business typically pays all in on its own merchant account (Merchant Cost Consulting). 2.9% + 30¢ is a common published built-in rate (sources).
FAQ
Interchange questions.
Can I negotiate interchange?
No. Interchange and network fees are the same whoever processes your cards. The processor's margin, and any account fees, are what differ.
How do I know if I'm on interchange-plus?
Your statement lists interchange by card type and shows the processor's markup as its own line. If you see one flat percentage, or "qualified" and "non-qualified" rates, you're not. How to read your statement.
Who sets my margin with SwitchKeep?
It's set with your account, by SwitchKeep Direct when you apply with us. Your statement shows it.
See your own breakdown.
Send a recent statement. We'll price the same month on your own merchant account, line by line.