Explained to kids!
Interchange is a tiny fee that a shop’s bank pays to the shopper’s bank each time someone pays with a card. It is a small thank-you for making the card work and keeping it safe. Shops pay it on almost every card payment.
Let’s see it in real life…
Every Saturday, Malik helps his grandma at her bread stall at the market.
A lady buys a big loaf for €2 and taps her card on grandma’s little card machine.
“Do we get the full €2?” Malik asks.
“Almost,” says grandma. “A tiny piece goes to the lady’s bank.”
“Why? She is the one buying the bread!”
“Her bank gave her the card, checks that nobody steals it, and promises that we get paid.”
“So the tiny piece is a thank-you for all that work?”
“Yes. And here in Europe there is a rule: for a card like hers, it can be 2 cents for every €10, not more.”
Malik counts on his fingers: on a €2 loaf, that is less than half a cent.
That is an interchange fee.
Tiny recap
- It means… a tiny fee the shop’s bank pays to the shopper’s bank for each card payment.
- It helps when… banks need money to run cards and stop thieves.
- Watch out for… lots of tiny pieces add up, so shops keep an eye on them.
…detailed for specialists
Interchange fees are the fees an acquirer pays to a card issuer on every card payment, under rate tables set by card networks such as Visa and Mastercard. They usually combine a percentage and a fixed amount, vary by card type, channel, region and merchant category, and form the largest part of a merchant’s card acceptance cost.
In 2026, interchange is moving on several fronts at once: a proposed US settlement with Visa and Mastercard, a court fight over the US debit cap, a planned cap in the UK and lower caps in Australia. For anyone who prices card acceptance, the cost inside each transaction is changing.
What are interchange fees?
Interchange is a transfer between banks. When a shopper pays by card, the merchant’s bank (the acquirer) pays a fee to the shopper’s bank (the issuer). The card network writes the rate tables, but it does not keep the interchange: the issuer does.
Issuers use this revenue to fund card programs, fraud monitoring, credit risk and rewards such as cashback or miles. That is why premium rewards cards usually carry higher interchange than basic debit cards.
Interchange is only one of three layers in what a merchant pays, often called the merchant service charge (MSC):
- Interchange, paid to the issuer.
- Scheme fees, paid to the card network for using its rails.
- Acquirer markup, kept by the acquirer, PSP or PayFac for processing, risk and service.
Merchants rarely see interchange on its own. Under blended pricing, it sits inside a single rate. Under interchange++ (IC++) pricing, each layer is shown separately on the statement.
How interchange fees work
- A shopper pays €50 by card, in a store or online.
- The acquirer sends the authorization request through the card network to the issuer.
- The issuer approves the payment.
- During clearing, the network applies the interchange rate that matches the transaction data.
- In settlement, the issuer sends the acquirer €50 minus interchange.
- The acquirer pays the merchant €50 minus the full merchant service charge.
The rate depends on data carried in the transaction:
- card type: debit, credit, prepaid, commercial or premium;
- channel: card present (chip, contactless) or card not present (online, in app);
- region: domestic, intra-regional or inter-regional;
- the merchant’s merchant category code (MCC);
- data quality: authentication results, tokens and, for commercial cards, extra invoice data.
Visa’s US tables show how wide the range is. In its schedule effective October 24, 2026, a regulated debit card in a store carries 0.05% + $0.21, an exempt debit card used online carries 1.65% + $0.15, and a Visa Infinite credit card used online can reach 2.60% + $0.10.
Interchange fees in numbers (2026)
- EU consumer cards: under the Interchange Fee Regulation, interchange is capped at 0.2% for debit and 0.3% for credit, and Member States may set lower domestic caps.
- Non-European cards in the EEA: Visa and Mastercard extended their inter-regional caps until November 2029: 0.2% (debit) and 0.3% (credit) in store, 1.15% and 1.5% online.
- US debit: Regulation II caps debit interchange for large issuers at 21 cents plus 0.05%, with a 1-cent fraud-prevention adjustment.
- US total: merchants paid a record $198.25 billion in card swipe fees in 2025, according to Nilson Report data cited by the Merchants Payments Coalition, a merchant lobby, including $118.8 billion on Visa and Mastercard credit cards.
- UK-EEA online: since Brexit, interchange on these cross-border payments rose from 0.2% to 1.15% for debit and from 0.3% to 1.5% for credit.
Interchange regulation in 2026: what is changing by region
United States: a settlement and a debit cap in court
In November 2025, Visa and Mastercard reached a proposed settlement with US merchants. It would cut the average effective US credit interchange rate by 10 basis points for five years, cap standard consumer credit rates at 1.25% for eight years, let merchants choose which categories of credit cards to accept (commercial, premium consumer, standard consumer) and widen their room to surcharge. A federal judge granted preliminary approval on June 9, 2026. Final approval was still pending in October 2026, and 978 businesses and trade associations filed objections asking the court to reject it.
On debit, the Federal Reserve proposed in October 2023 to lower the cap for large issuers, to a base of 14.4 cents. That proposal has not been finalized. Then, in August 2025, a North Dakota court vacated Regulation II in the Corner Post case, finding that the Fed had exceeded its authority. The vacatur is stayed pending appeal, so the current cap still applies. The Eighth Circuit heard the appeal in May 2026 and had not ruled by the fall.
European Union: stable caps
The 0.2% and 0.3% caps have applied to consumer cards since 2015. The debate has shifted to scheme fees, which the regulation does not cap, and to the cost of non-European cards, now frozen until 2029.
United Kingdom: toward a cap on cross-border online fees
The Payment Systems Regulator dropped its interim cap in October 2025 and chose to set one long-term cap instead. On January 15, 2026, the High Court rejected the challenge brought by Visa, Mastercard and Revolut, confirming the regulator’s power to cap these fees. The level and start date of the cap are still to be set. The government plans to fold the PSR into the Financial Conduct Authority, but the bill was still before Parliament in October 2026.
Australia: lower caps, no more surcharges
The Reserve Bank of Australia decided in March 2026 to remove surcharging on eftpos, Mastercard and Visa cards from October 1, 2026. On the same date, caps fell to 8 cents or 0.16% for domestic debit and to 0.3% for consumer credit. A 1% cap on foreign-issued cards follows on April 1, 2027.
Interchange fees: what changes for PSPs, PayFacs and platforms
Acquirers do not set interchange, but they and their partners decide how it reaches the merchant. Five points matter.
1. Pricing models
IC++ passes interchange and scheme fees through at cost and makes regulatory cuts visible. Blended pricing is simpler for small merchants but forces the provider to absorb or reprice each change. With new rules in the US, UK and Australia, pricing grids will need updates in 2026 and 2027.
2. Data quality
Interchange qualification depends on the data sent: the right MCC, card-present indicators, authentication results, and invoice data for commercial cards. Missing or wrong fields push transactions into more expensive categories, often called downgrades.
3. Routing
In the US, debit cards must be enabled on at least two unaffiliated networks, so merchants can route to the cheaper one. In Europe, co-badged cards let the merchant pick the brand. A payment orchestration layer applies these rules at scale.
4. Wallets, BNPL and alternatives
Apple Pay and Google Pay ride card rails, so wallet payments still carry interchange. Some Buy Now Pay Later providers earn interchange through virtual cards. Account-to-account instant payments carry none, one reason merchants promote them at checkout.
5. Reporting and reconciliation
Merchants ask why their costs move. PayFacs and platforms need interchange-level reporting for each sub-merchant and must explain changes after every scheme update. This is part of running the PayFac model well.
Can merchants lower interchange fees in 2026?
Not by negotiating interchange itself. They can act on what drives it: card mix, transaction data, routing, authentication and payment method mix. For PSPs, PayFacs and ISVs, transparent pricing and clean data turn a regulatory topic into a commercial advantage. NORBr provides the white-label payment infrastructure to route, onboard, pay out and analyze, under your own brand.
Frequently Asked Questions
What is an interchange fee?
An interchange fee is the fee a merchant’s bank (the acquirer) pays to the cardholder’s bank (the issuer) on each card payment. Card networks such as Visa and Mastercard set the rates, which depend on card type, channel, region and merchant category.
Who pays interchange fees?
The acquirer pays interchange to the issuer, then passes the cost to the merchant inside the merchant service charge, alongside scheme fees and the acquirer’s own markup. Consumers do not pay it directly, but it shapes prices, surcharges and card rewards.
What is the interchange fee cap in Europe?
Under the EU Interchange Fee Regulation, interchange on consumer cards is capped at 0.2% of the transaction for debit cards and 0.3% for credit cards. Member States can set lower caps for domestic transactions.
What is the 2025 Visa and Mastercard interchange settlement?
Announced in November 2025, it would cut the average US credit interchange rate by 10 basis points for five years, cap standard consumer credit rates at 1.25% and let merchants choose card categories to accept. It won preliminary approval in June 2026; final approval was pending in October 2026.
What is the difference between interchange and IC++ pricing?
Interchange is one cost component. IC++ (interchange plus plus) is a pricing model where the provider passes interchange and scheme fees through at cost and adds its own markup as a separate, visible line.
