WHAT ARE INTERCHANGE FEES?

Intro
Interchange fees are the base cost of accepting card payments. Every time a customer pays with a credit or debit card, a portion of the transaction goes to the card‑issuing bank. For merchants, understanding interchange is essential to interpreting statements, comparing processors, and choosing the right pricing model.

What are interchange fees?
Interchange fees are set by the card brands (Visa, Mastercard, etc.) and paid to the card‑issuing bank to cover the risk, processing, and infrastructure involved in card transactions. They vary by:

Card type (debit, credit, rewards).
Industry and merchant category code (MCC).
Transaction method (chip, contactless, keyed, online).

Processors pass these fees on to merchants through different pricing models.

Factors that influence your interchange costs

Several elements impact the interchange you pay:

Card mix: More rewards and corporate cards usually mean higher interchange.
Transaction type: Card‑present EMV transactions tend to have lower risk and cost than keyed or online transactions.
Industry rules: Certain industries, such as fuel, lodging, and healthcare, have specific interchange categories.

Improving how you process payments—using chip, avoiding key‑entry when possible, and submitting complete data—can help optimize interchange qualification.

Common pricing models and interchange

Processors typically package interchange into models such as:

Interchange‑plus: You pay actual interchange plus a transparent processor markup.
Tiered pricing: Transactions are grouped into “qualified”, “mid‑qualified”, and “non‑qualified” tiers, which can hide the true cost.
Flat‑rate: You pay one simple rate that blends interchange and markup.

For merchants who care about transparency, interchange‑plus or well‑designed cash discount programs often provide the most clarity.

Why interchange matters to your business

Interchange represents the largest portion of your processing costs. If you only compare “rates” between processors without understanding how they handle interchange, you may miss hidden margins or poorly qualified transactions. Reviewing statements regularly, asking how your pricing relates to interchange, and optimizing your processing methods can reduce unnecessary fees.

How MG Merchant Services can help
At MG Merchant Services, we help businesses understand their effective interchange costs and choose pricing structures that fit their transaction mix and industry. We analyze your current statements, explain where fees come from, and propose transparent options that align with your goals.