An interchange fee is the charge that a merchant's bank pays to the bank that issued a customer's card each time that card is used to buy something. It is folded into what the merchant pays to accept cards, and is usually the largest part of that price. The fee exists because a four-party card system, in which one bank signs up the shopper and a different bank signs up the shop, needs a way to move money between the two sides. Card networks such as Visa and Mastercard set the rates; the banks collect and pay them.

For anyone who sells online or buys media with a corporate card, interchange is a hidden toll on almost every transaction. In the US it is also the subject of a two-decade antitrust case and a debit cap that an appeals court struck down in October 2026.

How the money moves

A card payment involves four parties plus the network. The cardholder pays with a card issued by an issuing bank (the issuer). The merchant accepts it through an acquiring bank (the acquirer), often reached through a processor such as Stripe, Adyen, Fiserv or Worldpay. The card network routes messages and settles funds between them.

Authorisation travels from checkout to acquirer, network and issuer and back in about two seconds. Money moves later, at settlement. The issuer sends the acquirer the $100 less the interchange fee. The acquirer then pays the merchant the $100 less the full merchant discount rate (MDR), which bundles three things:

  • Interchange, kept by the issuer.
  • Network or scheme fees, kept by Visa or Mastercard, usually a fraction of interchange.
  • Acquirer markup, kept by the acquirer or processor.

On an illustrative $100 US online sale paid with a rewards credit card, interchange might be about $2.10 to $2.50, network fees around 10 to 15 cents and the acquirer's margin 20 to 50 cents, leaving the merchant roughly $97. The same sale on a debit card from a large bank would carry regulated interchange of about 26 cents. Flat-rate pricing, such as 2.9% plus 30 cents, hides the split.

What sets the rate

Interchange is not one number. Visa and Mastercard each publish schedules running to hundreds of categories, typically revised in April and October in the US. Rates depend on:

  • Card type. Debit is cheaper than credit; premium rewards and commercial cards cost the most, because issuers use the fee to fund points, cashback and lounge access.
  • Channel. Card-not-present (CNP) transactions, which include all e-commerce and in-app purchases, carry higher rates than card-present sales because fraud risk is higher.
  • Merchant category and data. Supermarkets and charities often get lower rates; commercial-card sales passing Level 2 and Level 3 line-item data can qualify for cheaper categories.
  • Issuer size and regulation. Under US law, debit cards from banks with more than $10 billion in assets are capped; smaller issuers are exempt and earn more.

Rates are quoted as a percentage plus a fixed amount, such as 1.65% plus 10 cents, so interchange on a $50,000 media invoice paid by card can exceed $1,000.

Origins and evolution

Interchange was born in 1971 at National BankAmericard, the bank-owned association that became Visa in 1976. Under its founding chief executive, Dee Hock, the association set a single default fee that acquirers paid issuers, replacing a tangle of bilateral deals. Mastercard's forerunner adopted the same model.

In NaBanco v. Visa, a processor called the collectively set fee price-fixing. A district court rejected the claim in 1984 and the Eleventh Circuit affirmed in 1986, accepting that a network needs a default rate.

Europe regulated first. The European Commission found in December 2007 that Mastercard's cross-border interchange breached EU competition law, upheld by the Court of Justice in September 2014. The Interchange Fee Regulation (EU) 2015/751, adopted on April 29, 2015, turned those levels into law for consumer cards from December 9, 2015: 0.2% of the transaction value for debit and 0.3% for credit. Commercial cards and three-party schemes such as American Express, where the network is also the issuer, were largely outside the caps.

In the United States, the Durbin Amendment to the Dodd-Frank Act, signed on July 21, 2010, told the Federal Reserve to make debit interchange "reasonable and proportional" to issuers' costs. The Fed's Regulation II took effect on October 1, 2011, capping debit interchange for large issuers at 21 cents plus 0.05% of the transaction, plus a 1 cent fraud-prevention adjustment. Credit interchange was left alone. In October 2023 the Fed proposed cutting the cap to 14.4 cents plus 0.04% and a 1.3 cent adjustment, a proposal that had not been finalised before the courts intervened.

The merchants' class action, In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, was consolidated in the Eastern District of New York in 2005. A $7.25 billion settlement from 2012 was overturned on appeal in 2016. A cash settlement of about $6.2 billion was reached in 2018. A March 2024 deal on rule changes, announced as lowering swipe fees, was rejected by Judge Margo Brodie in June 2024 as too small.

Why it matters for marketers

The most direct exposure is on the cost of a sale. For a merchant on a 3% card cost and a 10% net margin, interchange and its add-ons absorb nearly a third of profit on every card order. That number feeds into return on ad spend targets, profit-based bidding and break-even calculations that most media plans never itemise.

Advertisers also pay interchange from the other side. Ad platforms that accept cards pay the merchant fees on advertisers' spend, which helps explain why Google told a small group of advertisers that cards would no longer be accepted and why Amazon began moving some US advertisers off card billing onto deductions from seller proceeds, before delaying the change to August 1, 2026. Advertisers lose float and rewards; platforms save collection costs.

Card transaction data has also become an advertising asset. PayPal now sells a transaction graph across merchants, and TransUnion and Fiserv tied tap-to-pay transactions to shopper profiles on October 21, 2026.

Agentic commerce runs on card rails. OpenAI's Instant Checkout used stored cards and Stripe tokens before it was wound down in March 2026; Visa has built token infrastructure for AI agents and Mastercard registers agents through Agent Pay. Every agent-made purchase on those rails is a card-not-present transaction, priced at the higher end of the interchange table.

Limitations, criticisms and disputes

The central argument is about who pays. Merchants, led in the US by the National Retail Federation, call interchange a duopoly tax passed on through prices, so that cash and debit users subsidise wealthier rewards cardholders. Issuers answer that it pays for fraud protection, guaranteed payment and credit risk, and that caps cut rewards without lowering shelf prices.

Evidence on pass-through is genuinely mixed. A 2014 survey by Federal Reserve Bank of Richmond economists found that about three-quarters of merchants did not change prices after Regulation II cut their debit costs, while large banks scaled back free checking accounts.

Regulation also has gaps. The EU caps exclude commercial cards and most cross-border transactions with non-EU cards. After Brexit, Visa and Mastercard raised interchange on UK-EEA online transactions from 0.2% and 0.3% to 1.15% and 1.5%, prompting the UK Payment Systems Regulator to investigate and propose a price cap. US credit cards remain uncapped.

Interchange fee is not...

  • The merchant discount rate. The MDR is the total a merchant pays to accept a card. Interchange is one component of it, usually the largest.
  • A scheme or network fee. Visa and Mastercard charge them to banks for using the network, and they are not capped by EU or US rules.
  • A surcharge. A surcharge is an amount a merchant adds to the customer's bill to recover card costs. Card rules and local law limit it; it is the merchant's charge, not the bank's.
  • Interchange-plus pricing. This is a way acquirers bill merchants, passing interchange and network fees through at cost and adding a disclosed margin. It describes the invoice, not the fee itself.

Recent developments

The US legal ground shifted twice in 2026. On November 10, 2025, Visa and Mastercard announced a revised settlement with the merchant class that, according to an American Bar Association summary, cuts interchange by 0.1 percentage point for five years, caps standard consumer credit card rates at 1.25% and lets merchants decline some premium and commercial cards. The networks value it at $38 billion. Judge Brodie granted preliminary approval in June 2026; the National Retail Federation and other merchant groups have opposed it as leaving the fee structure intact.

Debit regulation is now in question. A federal court in North Dakota vacated Regulation II's fee standard in August 2025, according to Cooley, staying its own ruling pending appeal. In late October 2026 the Eighth Circuit affirmed the vacatur, holding that the Durbin Amendment requires the Fed to base the cap on costs specific to each transaction, according to the National Law Review. Merchants brought the case arguing the cap was too generous to banks, so the Fed now faces rewriting it.

Congress is the third front. The Credit Card Competition Act, which would require large issuers to enable a second, non-Visa or Mastercard network on credit cards, was reintroduced in January 2026, and President Donald Trump publicly backed curbs on swipe fees the same month. Illinois has barred interchange on sales tax and tips, a law the Office of the Comptroller of the Currency has sought to block for national banks.

Timeline

  • 1971 - National BankAmericard introduces a default interchange fee paid by acquirers to issuers.
  • 1976 - National BankAmericard is renamed Visa.
  • 1984 - A federal district court rejects the NaBanco price-fixing challenge to Visa's interchange; the Eleventh Circuit affirms in 1986.
  • 2003 - The Reserve Bank of Australia begins regulating credit card interchange.
  • 2005 - US merchant class actions against Visa and Mastercard are consolidated in the Eastern District of New York.
  • December 2007 - The European Commission rules that Mastercard's cross-border interchange fees breach EU competition law.
  • July 21, 2010 - The Dodd-Frank Act, including the Durbin Amendment, is signed into law.
  • October 1, 2011 - Regulation II caps US debit interchange for large issuers at 21 cents plus 0.05% plus a 1 cent fraud adjustment.
  • 2012 - A $7.25 billion US class settlement is announced; it is overturned on appeal in 2016.
  • September 2014 - The EU Court of Justice upholds the Commission's Mastercard decision.
  • April 29, 2015 - The EU adopts the Interchange Fee Regulation.
  • December 9, 2015 - EU caps of 0.2% for consumer debit and 0.3% for consumer credit take effect.
  • September 2018 - Visa and Mastercard reach a cash settlement of about $6.2 billion with US merchants.
  • October 2021 - Post-Brexit increases to UK-EEA card-not-present interchange begin.
  • October 2023 - The Federal Reserve proposes lowering the debit cap to 14.4 cents plus 0.04% plus 1.3 cents.
  • March 26, 2024 - Visa and Mastercard announce a rule-change settlement; Judge Margo Brodie rejects it in June 2024.
  • August 2025 - A North Dakota federal court vacates Regulation II's fee standard, staying the ruling pending appeal.
  • November 10, 2025 - A revised $38 billion settlement with the merchant class is announced.
  • January 2026 - The Credit Card Competition Act is reintroduced; President Trump endorses limits on swipe fees.
  • June 2026 - Judge Brodie grants preliminary approval to the revised settlement.
  • October 2026 - The Eighth Circuit affirms the vacatur of Regulation II's debit cap.

Summary

Who: Card issuers receive interchange; acquirers pay it on behalf of merchants; Visa and Mastercard set the rates; the Federal Reserve, European Commission, UK Payment Systems Regulator and Reserve Bank of Australia regulate parts of it; merchants, led by the National Retail Federation, contest it in court.

What: A per-transaction fee, typically a percentage plus a fixed amount, paid from the merchant's bank to the cardholder's bank, forming the largest part of a merchant's card acceptance cost.

When: Introduced in 1971 by National BankAmericard; capped in the US for large-bank debit since October 1, 2011 and in the EU for consumer cards since December 9, 2015; reshaped in 2025 and 2026 by a $38 billion US settlement and the Eighth Circuit's vacatur of the debit cap.

Where: In every four-party card transaction worldwide, with regulated caps in the EU, UK, Australia and for US debit, and no cap on US credit cards.

Why: It compensates issuers for credit risk, fraud and payment guarantees and funds card rewards, but merchants argue it inflates prices for all shoppers. For marketers it is a hidden cost in every online sale, a reason platforms steer advertisers away from card billing, and the default toll on agent-made purchases.