How Interchange Fees Affect Card Payments and Merchant Costs

Interchange fees are charges merchants pay to card-issuing banks and card associations whenever customers make card payments. For some credit card issuers, these fees can account for roughly a quarter of total revenue. Rates typically range from 1% to 6% per transaction. The exact charge depends on factors such as the merchant’s size, sales volume, transaction value, card type, and whether the card was physically used at the point of sale. Business and reward cards often cost more to process. Some merchants add surcharges to card payments to recover these costs and encourage the use of cash or debit cards. A proposed 2022 change aimed at expanding card-network options also faced criticism over concerns that it could weaken fraud detection.

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