Interchange Rates Explained: What Every Merchant Should Know

Interchange fees are the wholesale cost of credit card processing. They are set by the card networks — Visa, Mastercard, Discover, and American Express — and they represent the fee paid to the card-issuing bank every time a cardholder makes a purchase at your business.

How Interchange Rates Are Determined

Interchange rates are based on several factors: the card brand, card type (debit vs. credit, rewards vs. standard), transaction method (swiped, dipped, tapped, or keyed), merchant category code (MCC), and transaction size. Visa and Mastercard publish their interchange rate tables twice per year, typically in April and October.

The Interchange Rate Structure

Rates are expressed as a percentage plus a flat fee. For example, a standard Visa consumer credit card swiped at a retail terminal might carry an interchange rate of 1.51% + $0.10. A Visa Signature rewards card for the same transaction could be 2.10% + $0.10. The difference adds up quickly over thousands of transactions.

Why Your Card Mix Matters

You cannot control which cards your customers use, but understanding your card mix helps explain your costs. A business that sees a high volume of rewards cards, corporate purchasing cards, or international cards will naturally have higher interchange costs than a business whose customers primarily use standard debit cards.

Interchange Optimization

While interchange rates are non-negotiable, you can take steps to qualify for the lowest possible rates:

• Always settle batches within 24 hours — delayed settlement can result in higher "EIRF" or downgrades.
• Use EMV chip readers — card-present transactions with chip reads qualify for lower rates than keyed entries.
• Include Level 2 and Level 3 data for B2B transactions — providing additional transaction data (tax amount, customer code, line-item detail) can reduce interchange on corporate and purchasing cards by 0.50% to 1.00%.
• Ensure your MCC is correct — the wrong merchant category code can cause your transactions to be processed at higher interchange tiers.

The Bottom Line

Interchange fees typically account for 70-80% of your total processing costs. Understanding them is the foundation of managing your payment expenses effectively. Contact Mogil Partners for a detailed interchange analysis of your current processing.