Understanding Interchange Fees in Credit Card Processing


In the world of credit card processing, understanding interchange fees is crucial for businesses. These fees play a significant role in determining the overall cost of card transactions. Let’s break down the complexity and shed light on how businesses can navigate through this aspect of the credit card processing industry.

The Players

When a transaction occurs using card schemes like Visa or MasterCard, various entities come into play. These include the merchant (business), acquiring bank, card scheme/brand, and the issuing bank of the card. Each entity has a small markup within the interchange fee.

Interchange Fees: Unraveling the Basics

Interchange fees are the fees paid by the acquirer (merchant’s bank) to the cardholder’s bank for each transaction. These fees are then passed on to businesses as part of their card processing fees.

Non-Negotiable Nature

Card brands determine interchange fees, and these fees are non-negotiable. The rationale behind these fees is often linked to the rewards provided to cardholders.


Interchange fees experience changes twice a year, in April and October. Additionally, other factors, such as card present vs. card not present transactions, influence these fees. Card not present transactions generally incur higher costs due to the associated risks.

Factors Influencing Interchange Fees

Understanding the determinants of interchange fees is crucial for businesses looking to manage costs effectively.

Card Types

Different card types incur varying interchange rates. Deferred debit cards and prepaid credit cards, for instance, carry higher interchange rates.

MCC Code

The Merchant Category Code (MCC) assigned to a business based on its vertical market can impact interchange fees. Certain businesses, like restaurants, may benefit from lower interchange rates.

Navigating Credit Card Processing Costs

While predicting credit card processing fees can be challenging, businesses can implement strategies to manage costs.

Dual Pricing and Cash Discounting

Implementing dual pricing involves displaying separate cash and card prices. The merchant pays nothing, and the machine covers processing fees.


Surcharging is a program where merchants pass on a percentage of credit card fees to customers, helping businesses offset some costs.

Interchange Plus

The traditional interchange plus program involves merchants paying fees plus a small markup. Choosing the right company is essential in this case.

Choosing the Right Program

Selecting the most suitable program requires a thorough analysis. Businesses should consider their card mix and assess which program aligns best with their operations.

Freedom Payments Offerings

At Freedom Payments, we offer all three programs – dual pricing, surcharging, and interchange plus. Our commitment to transparency includes no contracts, no leases on equipment, and options for in-house short-term payment programs.


Navigating the intricacies of interchange fees in the credit card processing industry is a crucial aspect of managing business costs. Businesses must stay informed, choose the right program, and partner with reputable merchant services providers to optimize their financial efficiency. If you’re looking to save on processing fees, explore the options offered by Freedom Payments.

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