At Kurv, we’re all about helping business owners like you increase their financial well-being. We remain committed to providing the knowledge and resources you might not find with other payment providers. The more you know, the better control you can have over your business’s success!
Key Takeaways:
- Regularly analyzing your credit card processing fees is essential for any business owner.
- Interchange is the foundation of the payment industry’s cost structure.
- Interchange rates are generally adjusted semiannually. These modifications typically occur around April and October.
- Adapting your business’s processing patterns to achieve the lowest possible interchange rates is called interchange optimization.
That brings us to today’s topic: fees.
If you’ve reviewed your credit card or merchant statement recently, you may have noticed the fees charged to your merchant account. Understanding what these amounts represent is imperative, and we’ll help you with that today. But first, do you need help deciphering your merchant statement?
Types of Credit Card Processing Fees
Your credit card processing fees are the amounts your payment processor collects for each card transaction your business runs. It is essential to analyze these fees regularly because some change, typically about twice yearly.
These changes are often small but can add up quickly if you don’t monitor them. We’ll explore these increases further later.
Here are a few examples of fees you may be responsible for when you choose to process credit card payments at your business:
- Account Fees
- Equipment Fees
- Product & Service Fees
- Transaction Fees
If you have any questions about the fees you pay each month, we recommend contacting your processor and asking for details. Depending on your payment processor, your statement may differ from this list.
Every business accepting certain credit card types must pay one type of fee. An interchange fee is a fixed, non-negotiable part of accepting credit card payments.
What is Interchange?
Interchange is the foundation of the entire payment industry’s cost structure. Visa and other credit card networks still refer to interchange fees as “interchange reimbursement fees.” It is the wholesale price (also called “rate” or “fee”) controlled and charged by the type of card used, like Visa and Mastercard, for authorization and settlement of a credit card transaction. The fees are paid to the card-issuing bank to cover handling costs, fraud, bad debt costs, and the risk involved in approving the payment.
Interchange enables card issuers and processors to exchange bankcard transaction data and other card details and funds on a standardized basis. As a concept, interchange is complex and exists in an ever-changing state of flux, so you should pay attention to this section of your merchant statement. Most interchange fees are calculated as a percentage of the sales price plus a flat fee [1] BigCommerce Essentials “What are interchange fees and how are they calculated?”. Accessed August 27th, 2025. . On average, these fees range between 1 and 3 percent of the total value of a transaction. Various factors affect interchange, including:
Card Brand
- Each card brand (Visa, Mastercard, Discover) charges interchange fees, meaning you’ll pay a different rate for a Visa transaction than a Mastercard transaction.
Industry
- Interchange fees vary by business type.
- Traditional retail businesses generally pay the lowest rates, while eCommerce merchants, direct marketers, and B2B merchants face higher fees.
Card Type
- Processing a debit card with a secure PIN tends to cost less because it is considered to have a lower fraud risk.
- Credit cards with cashback or points programs, airline miles, or other rewards often have higher fees to help card issuers pay for these perks.
- In theory, this balances itself out because when rewards or cashback are available, customers spend more than they would have with their debit card.
Cardholder
- Each card brand (Visa, Mastercard, Discover) establishes its own interchange fees. For example, merchants would pay a different rate for a Visa transaction than for a Mastercard transaction.
Transaction Type
- Different fees are required for in-person and online (commonly known as “card not present”) transactions. This is because in-person transactions are considered less risky, requiring a PIN, signature, or other forms of identification [2]Adobe for Business “Understanding Interchange Fees“. Accessed July 30th, 2025. .
- Any business accepting credit cards online should expect to pay a higher rate for those transactions.
When do Interchange Rates Change and Why?
Interchange rates are adjusted semiannually. Typically, these adjustments occur around April and October each year.
However, due to the devastating impact the pandemic has had on many businesses, Visa and Mastercard have postponed their increase dates until April 2022 [3] PYMNTS “Mastercard And Visa Postpone Planned US Interchange Hikes“. Accessed August 27th, 2025. . Why do these rates have to change?
Credit card companies adjust interchange rates yearly to accommodate changing interest rates and market conditions. Here’s what Mastercard has to say about how interchange rates are determined:
“Setting interchange rates is a challenging proposition that involves an extremely delicate balance. If interchange rates are set too high, such that they lead to disproportionately high Merchant Discount Rates, merchants’ desire and demand for Mastercard acceptance will drop. If interchange rates are set too low, card issuers’ willingness to issue and promote Mastercard cards will drop, as will consumer demand for such cards. In response to these competitive forces, we strive to maximize the value of the Mastercard system (including the dollars spent on Mastercard cards, the number and types of cards in circulation, and the number and types of merchants accepting Mastercard cards) by setting default interchange rates at levels that balance the benefits and costs to both cardholders and merchants[4] Mastercard. “Mastercard Interchange Rates and Fees” Accessed August 20, 2025 “ – Mastercard
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Can You Control The Interchange Fees?
To a certain degree, you can influence interchange fees. For example, convincing your customers to buy more in-store than online could reduce your interchange fees by having fewer credit card transactions.
However, you have no control over your Merchant Category Code (MCC) [5]Investopedia “Understanding Merchant Category Codes (MCCs) for Reward and Reporting”. Accessed August 19th, 2025. . Your MCC is assigned to you and is dependent on the type of business you have. Limiting your customers’ choices could deter them from purchasing from your business.
Interchange Optimization
Interchange fees are non-negotiable. However, you can try to lower your interchange transaction fee. Transactions are eligible for different interchange categories depending on various factors.
Interchange optimization involves adapting your business’s processing behavior to achieve the lowest possible interchange costs. It’s easiest to think of it in terms of base or “target” interchange, “downgrade” interchange, and “enhanced” interchange.
You won’t be negotiating lower rates on a particular interchange category. Instead, you’re adjusting how you take credit or debit card transactions to qualify for a lower-cost category. This applies to fixing “downgrades” (or penalty categories) so you no longer have expensive penalties. You may meet the criteria for a better interchange category, even if you weren’t initially penalized.
Did you know…
Interchange fees account for the bulk of your business’s credit card processing expense, whether it’s a commercial card, business credit card, consumer card, or government card. Therefore, it is of paramount importance to ensure that most transactions qualify for the lowest possible categories as frequently as possible.
View Current Interchange Rates
You will find complete tables of current interchange rates at the following links:
We hope you can take advantage of the delay in rate increases. Contact your payment processor if you have any questions about your current rates. Or, if you are paying too much in fees, contact Kurv! Our team would be happy to complete a complimentary, no-obligation review of your current processing rates and help you find room to save.
