Visa and Mastercard Interchange

When businesses accept credit or debit card payments, they pay certain fees behind the scenes. One of the most important – and often misunderstood – is the interchange fee. For merchants who accept Visa or Mastercard, understanding these fees is critical for controlling costs and making informed decisions.

In this article, we explain what Visa and Mastercard interchange fees are, how they work, and how they affect your bottom line.

What Is an Interchange Fee?

An interchange fee is a transaction fee charged to the merchant’s bank (acquirer) and paid to the cardholder’s bank (issuer) every time a customer uses a credit or debit card. It compensates the issuer for the risks and costs involved in processing card payments.

These fees are set by the card networks—Visa and Mastercard—but collected by the banks.

Visa vs. Mastercard: Are the Interchange Fees Different?

Yes, Visa and Mastercard each publish their own interchange fee schedules, and while the structures are similar, the actual rates can vary slightly. Both networks review and update their interchange rates semi-annually, usually in April and October.

Here’s what influences the differences:

Card type (credit, debit, rewards, commercial)
Transaction type (online, in-store, contactless)
Merchant category code (MCC) – industry classification
Risk level (e.g., card-present vs. card-not-present)

How Interchange Fees Are Structured

Interchange fees are typically a percentage of the transaction amount plus a fixed fee.

Example:

Visa credit card (retail in-store): 1.51% + $0.10
Mastercard eCommerce (standard rewards card): 1.89% + $0.10

Note: These are example rates and vary based on the merchant category, region, and other factors.

What Determines Visa and Mastercard Interchange Rates?

Several factors influence the actual rate applied to a transaction:

Merchant Category Code (MCC)
Some industries, like supermarkets or gas stations, may qualify for lower interchange rates.
Card Type
Premium and rewards cards often carry higher interchange fees than basic debit cards.
Transaction Method
Card-present transactions usually have lower fees than card-not-present (CNP) or online transactions due to lower fraud risk.
Transaction Volume and Size
Larger businesses may qualify for negotiated rates or benefit from tiered pricing models.

Why Do Interchange Fees Matter to Merchants?

Interchange fees are the largest component of credit card processing costs. Here's why merchants should care:

Profit margins: Even a small percentage adds up over thousands of transactions.
Pricing strategy: Knowing your fees helps you price goods and services effectively.
Processor negotiations: Understanding the interchange landscape can help when negotiating with payment service providers.

Can Merchants Lower Their Interchange Fees?

While Visa and Mastercard set base interchange rates, merchants can optimize processing practices to qualify for lower tiers:

Use chip readers or contactless payments for card-present transactions.
Ensure accurate entry of customer and transaction data for online sales.
Work with a processor that supports Level 2/Level 3 data processing (for B2B merchants).