Interchange fees are charged to merchants by card networks for processing a debit or credit payment. These fees make up a majority of the cost involved in accepting a card payment. Though interchange fees are collected by the card networks, they are paid out to the bank that issued the payment card. The average interchange rate for a credit card payment is around 1.81%, while the typical interchange for debit cards is 0.3%.
- What Is An Interchange Fee?
- American Express Interchange Fees: Discount Rate
What Is An Interchange Fee?
Whenever a credit card or debit card transaction is processed, funds are transferred from the issuing bank to the acquiring bank, sometimes called the merchant bank. Card associations, like Visa and Mastercard, facilitate the process. For the service they provide, associations collect a fee from the acquiring bank – this is what's known as the interchange fees. Typically, the interchange fee is comprised of a percentage of the total transaction plus some fixed amount (e.g. 2% + $0.10). While the card associations assess and determine the fees, they are paid to the issuing bank. The card associations instead collect a separate fee called the network fee, though this is not considered to be a part of the interchange. The network fee is usually far smaller, averaging somewhere around 0.05%.
Visa & Mastercard Average Interchange Fees
Visa and Mastercard are the biggest card network companies in the world, so theirs are the interchange fees merchants will face most often. For both companies, the interchange will depend largely on the type of card used. As mentioned above, debit cards have significantly lower interchange rates than credit card ones. Furthermore, high-end rewards credit cards have higher interchange fees than non-rewards variants.
Interchange fees for both Visa and Mastercard will also vary between different types of transactions.
|Card Type||Interchange Rate (Swiped)||Interchange Rate (Keyed)|
|Visa Debit Retail CPS||0.800% + 15¢||1.650% + 15¢|
|Visa Debit Retail CPS Regulated||0.050% + 22¢||0.050% + 22¢|
|Visa Debit Retail Business||1.700% + 10¢||2.450% + 10¢|
|Visa Debit Retail Business Regulated||0.050% + 22¢||0.050% + 22¢|
|Visa Credit Retail CPS||1.510% + 10¢||1.800% + 10¢|
|Visa Credit Retail Rewards Traditional||1.650% + 10¢||1.950% + 10¢|
|Visa Credit Retail Rewards Signature||2.300% + 10¢||2.700% + 10¢|
|Visa Credit Retail Rewards Signature Preferred||2.100% + 10¢||2.400% + 10¢|
|Visa Credit Retail Corporate||2.100% + 10¢||2.650% + 10¢|
|Mastercard Debit Retail Swipe||1.050% + 15¢||1.600% + 15¢|
|Mastercard Debit Retail Regulated||0.050% + 22¢||0.050% + 22¢|
|Mastercard Credit Retail Consumer||1.580% + 10¢||1.890% + 10¢|
|Mastercard Credit Retail Enhanced||1.730% + 10¢||2.040% + 10¢|
|Mastercard Credit Retail World||1.770% + 10¢||2.050% + 10¢|
|Mastercard Credit Retail World Elite||2.300% + 10¢||2.500% + 10¢|
|Mastercard Credit Retail Corporate||2.500% + 10¢||2.650% + 10¢|
Visa has the highest number of cards in circulation as of 2016 with 52% of the market share. Mastercard comes in at number two, with 31.6% of the market.
Discover Average Interchange Fees & Rates
Discover interchange fees work similarly to Visa and Mastercard. The major distinction between these cards is that they distinguish between recurring payments and one-off payments. If your business charges a recurring monthly fee to a customer, you will generally pay a lower interchange fee than you would for an equivalent one off.
|Card Type||Discover Interchange Fee|
|Discover Debit||1.020% + 16¢|
|Discover Debit Regulated||0.050% + 22¢|
|Discover Debit Keyed||1.620% + 16¢|
|Discover Debit Keyed Regulated||0.050% + 22¢|
|Discover Consumer||1.560% + 10¢|
|Discover Rewards||1.710% + 10¢|
|Discover Premium||1.710% + 10¢|
|Discover Premium Plus||2.100% + 10¢|
|Discover Commercial||2.300% + 10¢|
|Discover Keyed Consumer||1.870% + 10¢|
|Discover Keyed Rewards||1.970% + 10¢|
|Discover Keyed Premium||2.000% + 10¢|
|Discover Keyed Premium Plus||2.150% + 10¢|
|Discover Keyed Commercial||2.300% + 10¢|
|Discover Debit Recurring||1.200% + 5¢|
|Discover Debit Recurring Regulated||0.050% + 22¢|
|Discover Recurring Consumer||1.200% + 5¢|
|Discover Recurring Rewards||1.200% + 5¢|
|Discover Recurring Premium||1.200% + 5¢|
|Discover Recurring Premium Plus||1.800% + 5¢|
|Discover Recurring Commercial||2.300% + 10¢|
As of 2016, Discover cards accounted for approximately 8.1% of all cards in circulations.
American Express Interchange Rates & Discount Rate
American Express doesn’t charge interchange fees, and instead imposes a discount rate. Though different in name, these are the same functionally. The American Express discount rate is composed of a percentage plus some fixed a fixed transaction fee.
The fees charged by American Express are largely dependent on the type of business being serviced. This is unlike Discover, Visa and Mastercard, all of whom have other qualifying factors impacting their interchange fees, such as whether a card is considered premium or not. Note that in certain instances, like with retail and restaurant transactions, your discount rate will be 0.30 points higher if it is keyed in and not swiped.
|Business Type||American Express Discount Rate|
|Fast Food Restaurant, lodging, mail order & internet, telecommunications, other transportation||3.50%|
|Restaurant||3.50% + $0.05|
|Independent Gas Stations||3.25%|
|Retail||2.89% + $0.10|
|Services, Wholesale & All Other||2.89% + $0.15|
|Office-based Doctor, Dentist, Orthodontist||2.55%|
|Healthcare not office-based||2.89% + $0.15|
Traditionally, American Express has more premium credit cards in their portfolio leading to higher interchange fees. While the fees themselves are higher, Amex also reportedly has cardmembers who tend to spend more than the average Visa or Mastercard user. While interchange fees have been historically higher with American Express than their competitors, many merchants choose to accept their cards to be able to do business with their high-spending cardholders.
As of 2016, American Express cards account for 7.5% of all cards in circulation.