Learn / Payments 101

What is interchange?

Interchange is the single biggest fee on every card sale you run — and the one you can't talk your way out of. Here's who sets it and how it lands on your rate.

Interchange is the fee your payment processor pays to the customer's card-issuing bank every time someone swipes, taps, or keys a card at your shop. It's set by the card networks — Visa, Mastercard, Discover, American Express — not by your processor, and it makes up the largest chunk of the cost to accept cards. For a typical in-person retail sale, interchange runs roughly 1.5% to 2.5% of the ticket plus a small fixed amount, though the exact number depends on the card.

If you've ever squinted at a merchant statement and wondered why your "rate" is never one clean number, this is why. The cost of accepting a card is a stack of three separate fees, and only one of them is yours to negotiate.

The three layers of every card fee

Every card sale you accept is priced in three parts. Two go to parties you'll never speak to. One goes to the company that sends you a statement.

Interchange is the money that flows to the bank that issued your customer's card. It's the reward for the issuer taking on the credit risk and funding the transaction, and it's why a rewards card costs a merchant more than a plain debit card — those airline miles get paid for somewhere.

Assessments are what the card network keeps for running the rails. They're much smaller than interchange, usually a fraction of a percent plus a tiny fixed fee, and like interchange they're the same for everyone.

Processor markup is the only layer you and your provider actually agree on. It's what your processor adds on top of the two network costs to make its money. When people talk about "shopping around" for a better rate, this is the part that can move.

Who sets interchange, and why you can't budge it

The card networks publish interchange rate tables — long, dense grids updated twice a year, usually in April and October. There are hundreds of categories. A card gets slotted into one based on the type of card (debit, credit, rewards, corporate), how the sale was accepted (tapped in person versus keyed over the phone), your business category, and the data sent with the transaction.

Because the network sets these rates and applies them uniformly, a corner smoke shop pays the same interchange on a given Visa rewards card as a national chain does. Big retailers don't get cheaper interchange — they get thinner processor markup because their volume gives them leverage on that third layer. The network cost underneath is identical.

That's the part shop owners find surprising: no processor can "lower your interchange." Any salesperson who promises to is really promising to shave their own markup, which is a fine thing to ask for — just call it what it is.

How interchange becomes your effective rate

Your effective rate is the number that actually matters: total card fees for the month divided by total card sales. It rolls up all three layers and every category your customers happened to use.

Say you run $40,000 in card sales in a month and pay $1,240 in total fees. Your effective rate is about 3.1%. Change nothing about your pricing, but have a heavier month of premium rewards cards and keyed phone orders, and that same store might land at 3.4% — not because anyone raised a rate, but because the card mix shifted into pricier interchange buckets.

This is also why two shops with the "same" processor can pay very different effective rates. Ticket size, debit-versus-credit mix, and how often cards are keyed instead of tapped all push the blended number around.

What you can actually control

You can't negotiate interchange. But you have three real levers:

• Push for interchange-plus pricing. It shows interchange and assessments as pass-through cost, then a stated markup on top — so you can see exactly what your provider is charging versus what the networks are.
• Accept cards the cheap way. Tapped and dipped in-person sales qualify for lower interchange than keyed-in ones. Good hardware and clean data entry keep you in the better categories.
• Decide who covers the fee. This is where dual pricing comes in. Interchange sets your cost; dual pricing sets who pays it. With a compliant cash-discount model, the card cost is already in the shelf price and cash customers simply pay less.

Batchly builds that last lever right into the register: 3.5% + $0.20 per card sale, and on every ticket you choose whether the store absorbs it, the customer covers it, or you split it. Want to see it in dollars? Run your numbers through the card fee calculator, or read up on why the cash-discount approach is legal in all 50 states. (Always confirm the specifics with your processor and counsel for your state.)

Frequently asked

What is interchange in simple terms?

It's the fee your processor pays to the customer's card-issuing bank on every card sale. It's the largest piece of what you pay to accept cards, and it's set by the networks like Visa and Mastercard, not by your processor.

Can I negotiate interchange rates?

No. Interchange is published by the card networks and applies the same way to every merchant on a given card type. You can only negotiate the processor's markup, which sits on top. Ask about that layer, and ask for interchange-plus pricing.

What's the difference between interchange and assessments?

Interchange goes to the customer's bank. Assessments are a smaller fee the network keeps for itself, usually around 0.13% to 0.15% plus small per-transaction amounts. Both are non-negotiable network costs. The processor markup is the third, negotiable layer.

Why do my card fees change from month to month?

Interchange has hundreds of categories. A rewards card, a corporate card, or a keyed-in sale can each land in a pricier category than a basic tapped debit card. Your blended rate moves with the mix of cards your customers actually use.

How does dual pricing relate to interchange?

Interchange sets your cost. Dual pricing decides who covers it. With a cash-discount model, the shelf price already includes the card cost and cash-paying customers get a lower price, so interchange stops eating into your margin on card sales.