Interchange fees explained (US guide)

If you accept card payments in the US, interchange fees are part of the cost of doing business, even if they aren’t always easy to spot. These fees apply every time a customer pays with a credit or debit card, and they can add up quickly across a high volume of transactions.

This guide explains what interchange fees are, who pays them, how they’re calculated, and what US businesses can do to manage their impact. We'll also discuss the Wise Business account. The global account that can help your company with all things cross-border.

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What are interchange fees?

Interchange fees are fees paid as part of a credit or debit card transaction. When a customer uses a card to pay, a portion of the processing cost goes to the bank that issued the card. That portion is known as the interchange fee.

In the US, interchange fees typically range from about 1% to 3% of the transaction, plus a small flat fee.¹ The exact amount depends on factors like the type of card used and how the payment is processed.

Interchange fees apply to both credit and debit card payments and are set by card networks such as Visa, Mastercard, Discover, and American Express.

How interchange fees are charged

Interchange fees are not paid directly by customers. Instead, they’re deducted behind the scenes before the money reaches the business.

Here’s what happens in simple terms:

• A customer pays with a card
• The business’s bank pays an interchange fee to the cardholder’s bank
• The business receives the payment minus interchange and other processing fees

Because this all happens automatically, interchange fees are easy to overlook, even though they apply to nearly every card purchase.

Interchange fees vs other card payment fees

Interchange fees are only one part of the total cost of accepting card payments. Most US businesses pay three types of fees for each transaction.²

Fee type	Who receives it	What it covers
Interchange fees	Cardholder’s issuing bank	Card issuance, fraud protection, chargeback risk, and reward programs
Network or assessment fees	Card networks like Visa or Mastercard	Network infrastructure, security, and operating rules
Processor or acquiring bank fees	Payment processor or acquiring bank	Payment processing, reporting tools, and customer support

For most businesses, interchange fees make up the largest share of total card processing costs. The other fees are usually smaller, but they still affect the final amount deposited into the business’s account.

Why interchange fees exist

Interchange fees help keep the US card payment system running.

For issuing banks, interchange fees help:

• Cover the cost of issuing and maintaining cards
• Offset fraud and chargeback risk
• Fund rewards programs and cardholder benefits

For card networks, interchange fees support:

• A payment system that works across millions of businesses
• Ongoing investment in security and fraud prevention
• Coordination between banks, processors, and merchants

For merchants, interchange fees are part of the cost of offering customers a fast and widely accepted way to pay. While they increase payment costs, they also support a system that allows card payments to work reliably at scale.

Who pays interchange fees?

In the US, merchants ultimately pay interchange fees. Customers pay the full purchase price at checkout, but the cost of accepting a card is absorbed by the business.

Interchange fees are deducted automatically before funds are deposited into the merchant’s account. Because they don’t appear as a separate charge to customers, they’re easy to overlook, even though they apply to nearly every card transaction.

For businesses that process a high volume of card payments, interchange fees can have a meaningful impact on margins, pricing decisions, and cash flow forecasting.

Small percentage-based fees add up over time, particularly for businesses with thin margins or large average transaction sizes.

How interchange fees work

Interchange fees are applied as part of the card payment process itself. Every time a customer pays with a credit or debit card, multiple parties work together behind the scenes to authorize the payment and move the money. Interchange fees are built into this flow and are settled automatically before funds reach the merchant.

Once you understand the entire process, it’ll explain why interchange fees vary from transaction to transaction and why they’re deducted before a business is paid.

Below is a simplified step-by-step overview of how a typical US card transaction works.³

1. The customer makes a purchase

A customer pays with a credit or debit card in person, online, or over the phone. At this stage, the transaction details are captured, including the card type, payment method, and purchase amount.

2. The merchant submits the transaction

The merchant’s payment system sends the transaction details to its payment processor or acquiring bank. This includes information needed to request authorization and assess basic transaction risk.

3. The transaction is routed through the card network

The card network, such as Visa or Mastercard, routes the transaction request from the acquiring bank to the customer’s issuing bank using its payment infrastructure and rules.

4. The issuing bank approves or declines the payment

The issuing bank verifies whether the cardholder has sufficient funds or available credit and assesses the fraud risk before approving or declining the transaction.

5. Settlement takes place

After approval, the transaction moves to settlement. During this stage, interchange fees are applied, and the issuing bank receives its portion before the remaining funds continue through the system.

6. The merchant receives the funds

The merchant’s bank deposits the transaction amount into the merchant’s account, minus interchange fees and other processing costs. This typically happens within one to two business days.

How are interchange fees calculated?

Interchange fees are not a single flat rate. In the US, the amount charged on each transaction depends on a combination of factors, including the card, the transaction, and the business accepting the payment.

Most interchange fees follow the same basic structure:

• A percentage of the transaction amount
• Plus a small fixed fee per transaction

The exact rate applied can change from one payment to the next, even for the same business.

Here are some factors that influence interchange fees in the US:⁴

Type of card used

Credit cards typically have higher interchange fees than debit cards. Premium, rewards, and business credit cards usually cost more than standard cards because issuing banks use interchange revenue to fund rewards and benefits.

Debit vs credit transactions

Debit card interchange fees are generally lower than credit card fees. Some debit transactions in the US are regulated under federal law, which can further limit interchange costs for certain cards.

How the transaction is processed

Card-present transactions, such as in-store payments, usually have lower interchange fees than card-not-present transactions, such as online or phone payments. This reflects the higher fraud risk associated with remote payments.

Merchant category code (MCC)

Every business is assigned a merchant category code based on the type of goods or services it sells. Some industries have higher average risk or different transaction patterns, which can affect interchange rates.

Transaction size

Because interchange fees include a percentage component, larger transactions typically result in higher fees in dollar terms. Smaller transactions may feel the impact of the fixed fee more strongly.

Additional transaction data

For certain types of cards, especially corporate or purchasing cards, providing extra transaction details can qualify the payment for a lower interchange rate.

Why interchange rates vary so widely

Card networks publish detailed interchange tables that contain hundreds of possible rates. Each rate applies only if specific criteria are met, such as the speed of settlement or the processing method.

As a result, two transactions for the same amount can have very different interchange fees depending on the card used, the payment method, and the business accepting the payment. This variability is one reason interchange costs can be difficult for US businesses to predict without detailed reporting.

Looking at these factors can help you identify where interchange costs come from and where there may be opportunities to manage them more effectively.

Credit card interchange fees vs debit card interchange fees

In the US, interchange fees can vary significantly depending on whether a customer pays with a credit card or a debit card. This difference comes down to how the cards work, how risk is managed, and how debit transactions are regulated.

In general, credit card interchange fees are higher than debit card interchange fees, making payment mix (using different networks and cards) important for US businesses.

Credit card interchange fees

Credit card interchange fees are typically higher because issuing banks take on more financial risk. When a customer pays with a credit card, the issuing bank extends credit and guarantees payment to the merchant, even though the cardholder may repay the balance later.

Several factors contribute to higher credit card interchange fees:

• Credit risk: Issuing banks carry the risk that a cardholder may not repay their balance in full or on time.
• Rewards and benefits: Many credit cards offer cash back, points, travel perks, or purchase protections. Interchange fees help fund these programs, which increases the cost for merchants.
• Card tier and use case: Premium, business, and corporate credit cards usually have higher interchange fees than standard consumer cards.

For e-commerce and subscription-based businesses, credit card interchange fees can account for a large share of total payment costs, since online transactions are often card-not-present and frequently involve rewards cards.

Debit card interchange fees

Debit card interchange fees are generally lower because payments are made directly from a customer’s bank account rather than through a line of credit. It reduces risk for issuing banks and lowers processing costs.

In the US, debit card interchange fees are also influenced by federal regulation. Under Regulation II of the Durbin Amendment, debit card interchange fees for large issuing banks are capped for many transactions.

According to the Federal Reserve Board, these limits apply to debit cards issued by banks with more than $10 billion in assets, which often results in lower costs for merchants.⁵

Debit card interchange fees can still vary based on factors such as:

• Whether the card is issued by a regulated or an unregulated bank
• How the transaction is processed, such as in person or online
• The size and type of the transaction

Because of this regulation, debit card payments are often less expensive for US businesses than credit card payments, though they aren’t always the lowest-cost option in every scenario.

How interchange fees interact with international payments

Accepting card payments from international customers adds another layer of complexity to interchange fees. These transactions often cost more than domestic payments, and the difference is not always obvious at checkout.

Here’s how interchange fees typically behave when payments cross borders.

1. International cards usually trigger higher interchange rates

When a customer uses a card outside the merchant’s country, the transaction is classified as international or interregional. Card networks apply different interchange schedules to these transactions, which are often higher than domestic rates.

For US merchants, this means a sale paid with a foreign-issued card can cost more even if the purchase amount and card type appear similar.

2. Interchange is assessed independently of FX, which is charged separately

Interchange fees are deducted during settlement, before currency conversion takes place. Any foreign exchange markup or conversion fee is added separately afterward.

As a result, international card payments can include multiple cost layers:

• Interchange fees set by the card network
• Network or assessment fees
• Currency conversion or FX markups

Because these deductions happen at different stages, businesses may only see the full impact once funds reach their account.

3. Cost variability increases as international volume grows

For businesses with customers in multiple countries, interchange fees can introduce variability that scales with volume. Different issuing regions, card tiers, and transaction methods can all affect the final cost.

This variability can influence:

• Margin consistency across markets
• Subscription pricing for international customers
• Cash flow forecasting and reconciliation accuracy

Without detailed reporting, these differences are easy to miss.

4. Comparing payment methods becomes more important internationally

Card payments offer speed and familiarity, but they’re not always the most cost-effective option for cross-border transactions. As interchange and FX costs rise, businesses often compare cards with alternatives such as local payment methods or bank-based transfers. International differences in interchange fees mean businesses should focus on total cost, not just headline processing rates.

Final thoughts

Interchange fees are part of every card payment, whether you see them or not. They affect margins, cash flow, and how predictable your payment costs really are.

Once you grasp how they work, you gain better visibility into where money is going and why some transactions cost more than others.

That clarity makes it easier to price confidently, compare payment methods, and plan for growth without surprise.

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Sources:

1. NerdWallet – Interchange Fees
2. Corporate Tools – Credit card processing fees
3. NMI – Flow of a credit card payment
4. Stripe – How are interchange fees calculated
5. Checkout – The Durbin Amendment