Interchange fee
A fee the merchant's bank pays the cardholder's bank on each card purchase, usually a percentage plus a fixed amount set by the card networks.
What an interchange fee is
An interchange fee is a payment from the acquirer, the merchant's bank, to the issuer, the cardholder's bank, on each card purchase. Visa, Mastercard and other networks publish the rates, which vary by card type, merchant category and how the card is used. It is a major part of what merchants pay to accept cards.
How it works
Interchange moves during clearing and settlement, so the cardholder never sees it. The issuer keeps it from the purchase amount, and the merchant's processing costs include it. Merchants on interchange-plus pricing see it itemized on their statements.
- 01 · AUTHORIZE The cardholder pays, and the issuer approves the transaction through the network.
- 02 · CLEAR The network applies the interchange rate for that card and transaction type.
- 03 · SETTLE The issuer sends the amount minus interchange; the acquirer pays the merchant.
Why it matters for card programs
- Issuers earn it on each purchase; a sponsor bank often shares it with its fintech program
- Debit issuers under $10 billion in assets are exempt from the Regulation II cap
- Rates differ for debit, credit, prepaid and commercial cards
- Merchants pay it as part of their card processing costs
Cross River issues debit, credit and prepaid card programs as a Visa and Mastercard member. It offers issuing bank identification number (BIN) sponsorship and a processor-agnostic platform. See card issuing at Cross River.