22nd June 2020

What is The Interchange Fee?

To put it simply, the Interchange Fee is a percentage fee paid by the merchant to the cardholder’s issuing bank, whenever they use their credit/debit card for a transaction. This incurred cost is essentially the fee for accepting payments and covering handling costs, the inherent risk involved in processing, as well as settling the transaction.

It would be good to note that different card issuers have their own set of rules and policy regarding the fee. Here are some examples from Visa, Mastercard, American Express. The factors determining the fee are the following: 

  • Transaction type 
  • Type of card used (consumer, corporate, specific type card) 
  • Location of merchant 
  • Location of issuing bank

What is The Interchange Plus Plus (++) Fee Structure?

The Interchange Plus Plus (++) Fee Structure is a pricing model leveraged by the acquirer or payment provider, charging a merchant for card transactions. The structure is made of two additional layers sitting on top of the Interchange Fee explained in the previous section. Here are the other two:

Card-Scheme Fee (+)

This is a straightforward charge paid by the acquirer to the issuing bank (Visa, MasterCard) for using their network. This type of fee is traditionally less than the Interchange Fee, usually ranging from 0.10% to 0.65% for e-commerce. Much like the Interchange Fee, the Card Scheme Fee is based on the transaction type, card type and location of both merchant and issuing bank.

Processing Fee (++)

This is a fee added to the pricing model by the acquirer for providing card processing technology. This is one of the major revenue streams for payment providers which means the fee is different for each vendor. The incurred cost is mostly aligned with a provider’s risk exposure and the merchant’s MCC category code.