Interchange 101: The Most Misunderstood Fee in Payments

Every business pays interchange fees — but ask ten people what they are, and you’ll get ten different answers.
That’s not your fault. The payments industry has spent decades making them intentionally difficult to understand.

Let’s fix that.

Once you know what interchange actually is, you’ll be able to tell the difference between what’s required and what’s markup — and that difference is where clarity (and savings) begin.

What Interchange Really Is

Interchange is the fee your business pays every time a customer uses a credit or debit card.
It goes directly to the bank that issued the customer’s card — not your payment processor.

That means Visa, Mastercard, American Express, and Discover set these rates, not the company that processes your payments.

So what exactly does interchange cover?

• Fraud protection and risk management.

• Secure transfer of funds from the customer’s bank to yours.

• Network operations — the behind-the-scenes infrastructure that allows every transaction to happen instantly and reliably.

Interchange varies based on:

• Card type (credit vs. debit, consumer vs. rewards).

• Transaction method (chip, tap, swipe, or online).

• Business type (restaurant, retail, professional services, etc.).

Think of interchange as the toll you pay to use the card networks’ highway — and the rates are determined by the road you take, not the car you drive.

The Common Misconceptions

There’s a lot of misinformation about interchange. Let’s clear up the most common myths:

Myth #1: “My processor controls interchange.”
Not true. Processors pass through interchange to the banks. What they add on top — that’s their markup, and that’s where your negotiable costs live.

Myth #2: “Interchange is random.”
Far from it. Visa and Mastercard publish interchange tables twice per year. They’re public and structured, though not easy to interpret. But the good news is, the base rate doesn’t change from merchant to merchant — only how processors explain (or hide) it.

Myth #3: “There’s nothing I can do about it.”
You can’t change the network rates, but you can make sure you’re being charged correctly.
If a card-present transaction is categorized as “keyed-in” or “manual entry,” for example, you could be paying more than necessary — simply because of how it was coded.

Why It Matters

Let’s make it tangible.

Imagine a small retail store that processes $100,000 in card transactions each month.
Of that, $2,000–$3,000 typically goes to interchange fees.
But if those transactions are misclassified — say, as riskier keyed-in purchases instead of secure chip transactions — that same business could pay hundreds more each month in unnecessary costs.

And those costs compound. Month after month, year after year, small classification errors can quietly erode thousands of dollars in profit.

Understanding interchange isn’t about memorizing charts or arguing with networks. It’s about identifying when your statement doesn’t make sense — and knowing enough to ask the right questions.

That’s where transparency creates leverage.

The Transparency Advantage

Interchange isn’t the villain of payments — opacity is.

The real problem is when businesses can’t see what portion of their fees go toward legitimate network costs versus processor markup. That’s where hidden profits often live.

Understanding interchange gives business owners control.
It helps them separate the baseline cost of accepting cards from the inflated extras added by processors.

At Paygent.ai, we believe the future of payments isn’t about eliminating fees — it’s about understanding them.
You shouldn’t have to guess what’s fair or rely on what someone tells you. You should be able to see it, clearly, in plain English.

Because when you understand interchange, the rest of the payment process finally makes sense.