What is Interchange?

Interchange means the amount of money that banks and card brands (Visa, MasterCard, American Express, Discover) charge. Interchange is the portion of the processing cost that no credit card processor has control over. These rates are the same no matter where your merchant services account exists.

What factors into Interchange Fees?

Card Brand Fees

Often on merchant services or credit card processing statements, you will see a slew of mysterious and cryptic fees. These are known as Card Brand Fees or Card Association Fees. These are the fees that are paid back to Visa, MasterCard, Discover, or American Express. Depending on your merchant services statement, they can appear as different things, but are often labeled NABU fees (Network Access and Brand Usage Fees).

Interchange fees are split up between some of the money going to the card-issuing bank – like Chase or Bank of America – while the rest of the fees go to the card brand. Like all interchange fees, the card brand fees are not charged by Gravity Payments or any credit card processing company, but by the banks and card brands themselves. The credit card processor only collects the fees and passes them through to the card brand and bank.

Card Type

Each credit card type will be associated with a different wholesale or interchange fee. Debit cards have a lower percentage cost, but will incur a flat fee (typically less than a dollar) for using the pin function. Rewards, cash back, air travel cards, business cards, or government cards will also have different percentages charged by the card brands and banks for merchant services. The credit card processor can affect the base rate of these fees.


Based on a list of criteria, different business types and sizes will incur different interchange fees from card brands and banks. Some businesses are higher risk and so the ability to run credit card transactions is going to be more costly to them. Businesses that work in the B2B space might be able to gain more information from their customers to lower the cost of their merchant services, but the card brands themselves define industry risk. This is called Level 2 and Level 3 processing.

Transaction Type

Depending on how you accept a sale, your interchange fee will affect your merchant services account. For instance, swiping, inserting a chip card, or using NFC contactless payments like Apple Pay or Samsung Pay, will often result in a lower wholesale cost. If you key-enter a payment over the phone or a payment is initiated online through a virtual terminal or e-commerce shopping cart, the cost will be higher. This is due to risk. Having a card present being used to initiate the transaction is significantly more secure than someone entering in credit card information online.

Interchange Qualification

Interchange qualification is the percentage of the transacted amount consumed by the customer’s card-issuing bank. This amount depends on the interchange category that the transaction falls into (see below). The category is dictated by the card brands themselves and this process is called qualification. This happens on a per-transaction basis.

A number of factors determine the interchange category. While some of these factors, like card type (rewards, government, business card, etc.), are uncontrollable by the merchant, other factors are controllable.

Processing Method

The processing method is one of the few factors controllable by merchants that can affect the qualification. This defines how the credit or debit card information was presented to the merchant. The more secure the processing method, the less costly to the merchant the interchange percentage generally will be.

Card Present

A card present transaction can occur through a variety of functions and will result in a lower percentage being taken out by the issuing bank. A card present transaction is when the card is physically used during a transaction. This can be accomplished through a multitude of platforms including, but not limited to, swiping the card, dipping the EMV chip card, NFC or contactless payments like Apple Pay and Samsung Pay.

Card Not Present

Similar to card present, there are many ways in which a credit card transaction can be processed without the physical card being presented to the merchant. Card not present transactions will include MOTO (Mail Order & Telephone), virtual terminals, online shopping cart transactions, recurring billing, etc.