What are interchange fees, and who really pays them?

#What is an interchange fee in plain English?

When you tap a card in a shop, the shop does not deal with your bank directly. It has a contract with a payment company called the acquirer, and your card comes from a bank or card company called the issuer. An interchange fee is the amount the acquirer pays the issuer for each card payment. Visa describes its interchange reimbursement fees as transfer fees between acquiring banks and issuing banks for each card transaction⁠^[1]. If these roles are new to you, start with how card payments work and the glossary entry for acquirer.

The money ultimately comes from the merchant. Visa points out that merchants do not pay interchange directly: they negotiate and pay a merchant discount to their own financial institution⁠^[1]. That merchant discount (often called the merchant service charge) bundles interchange, card-network fees and the acquirer's own margin. So interchange is a cost hidden inside a cost, which is why most shoppers never hear about it.

#Who pays interchange, and who receives it?

Think of three layers. The merchant pays its acquirer. The acquirer passes the interchange part to the issuer. Card networks charge their own scheme fees on top. The US Federal Reserve's Regulation II defines an interchange transaction fee as a fee paid by a merchant or acquirer to compensate an issuer for its involvement in an electronic debit transaction⁠^[2]. You, the cardholder, normally pay nothing per purchase, although interchange income is one of the ways issuers fund card programmes.

#How do the EU and US limit interchange?

The European Union's Interchange Fee Regulation caps interchange on consumer debit cards at 0.2% and consumer credit cards at 0.3% of the transaction value; the caps have applied since December 2015⁠^[3]. The European Commission's fact sheet notes that interchange fees had been an important source of revenue for issuing banks, representing about €13 billion a year in the EU⁠^[3]. Because the cap is a pure percentage, a €10 purchase carries ten times less maximum interchange than a €100 purchase.

The United States takes a different approach and caps debit cards only. Under Regulation II, a covered issuer may receive no more than 21 cents plus 5 basis points (0.05%) of the transaction value⁠^[4], plus a fraud-prevention adjustment of no more than 1 cent if it meets the Fed's fraud-prevention standards⁠^[5]. The cap applies to issuers that, together with affiliates, have $10 billion or more in assets; smaller issuers are exempt⁠^[2]. Credit card interchange in the US is not capped by this rule.

#Why does a small purchase cost the shop more in percentage terms?

The US debit cap mixes a fixed part (21 cents) with a percentage part (0.05%). On a tiny purchase the fixed part dominates; on a large one it barely matters. The worked example below shows the maximum interchange a covered US issuer could receive, including the 1-cent adjustment, at four purchase sizes. These are caps, not the fee every payment carries.

That is why small merchants often care so much about card costs, and why some set minimum card amounts where local rules allow it. The Fed itself illustrated the cap using a $50 debit purchase: 24.5 cents under the current rule⁠^[6], which matches the calculation above.

#Do exempt banks really earn more interchange?

Yes, on average. The Federal Reserve's 2024 data show an average interchange fee of $0.23 per transaction for covered (capped) issuers and $0.51 for exempt issuers⁠^[7]. The same data show higher average fees on dual-message networks ($0.37, the signature-style networks) than on single-message networks ($0.25, typically PIN-based)⁠^[7]. Averages hide a lot of variation, so treat them as a picture of the market, not a price list.

#Is the US debit cap changing?

Two things are moving at once. First, in October 2023 the Fed proposed lowering the cap; it said the maximum on a $50 transaction would fall from 24.5 cents to 17.7 cents and that the cap would be updated every other year from issuer cost data⁠^[6]. A law-firm summary from August 2025 described that proposal as still pending⁠^[8].

Second, in August 2025 a federal district court in North Dakota, in Corner Post v. Board of Governors, vacated Regulation II's debit interchange fee framework, but stayed its own decision pending appeal⁠^[8]. As of April 2026 the vacatur remained stayed and briefing in the Eighth Circuit had finished⁠^[9]; oral argument took place in May 2026⁠^[10], and in July 2026 a merchant trade group still described the case as before the Eighth Circuit⁠^[11]. The regulation text on eCFR, current to 1 October 2026, still sets the 21-cent standard⁠^[4].

#Does interchange affect what I pay as a shopper?

Indirectly. The European Commission's view is that these fees end up being passed on to consumers through higher retail prices, which was one reason for capping them⁠^[3]. Since 2018 EU rules have also stopped merchants from adding surcharges to consumer card payments⁠^[3]. Elsewhere, surcharging rules differ by country and card type. Interchange also helps explain card perks: issuers earn more on some products than others, which can fund rewards. To estimate what a merchant pays overall, try the card fee calculator.

Related reading: the short definition of interchange, how chargebacks move money back the other way, and the comparison of debit, credit and prepaid cards.