is a term used in the payment card industry to describe a fee paid between banks for the acceptance of card based transactions. In a credit card or debit card transaction, the card-issuing bank in a payment transaction deducts the interchange fee from the amount it pays the acquiring bank that handles a credit or debit card transaction for a merchant. Interchange fees are set by the payment networks such as Visa and MasterCard and are the largest component of the various fees that most merchants pay for the privilege of accepting credit cards, representing up to 90% of these fees by some estimates, although larger merchants typically pay less as a percentage.
Interchange fees have a complex pricing structure, which is based on the card brand, regions or jurisdictions, the type of credit or debit card, the type and size of the accepting merchant, and the type of transaction (e.g. online, in-store, phone order, whether the card is present for the transaction, etc.) Transactions that comply with highest level of payment security have a lower interchange fee.
These rates will be the same no matter what processor company you use as they are determined by Visa/MC and the issuing bank based on four key factors:
- Brand and type of card the customer uses (Credit, Debit, Rewards, Corporate, etc.)
- Type of business you run (Retail, Restaurant, Gas Station, Hotel, e-Commerce, etc.)
- Type of transaction that was made (card present vs card not present transactions)
- Information collected with transaction for verification (address verification, tax amount, etc.)
In the United States, the fee averages approximately 2% of transaction value. Click here to view Visa’s interchange listing as of April 2015.Visa-USA-Interchange-Reimbursement-Fees-2015-April-18