Interchange, explained
Interchange is the wholesale cost sitting underneath every card payment you take. Understand it once, and every quote you're ever given suddenly makes sense.
6 min read
If there's one concept that unlocks the whole subject, it's interchange. Once you know what it is, the difference between a fair quote and a padded one becomes obvious. It sounds technical; it really isn't.
What interchange actually is
Every time a customer pays by card, a fee is paid to the bank that issued that customer's card — the one whose name is on the plastic. That fee is called interchange. It's the wholesale cost of accepting a card, and it's the largest part of what you pay.
Crucially: your processor doesn't set interchange and doesn't keep it. Visa and Mastercard publish the rates; the customer's issuing bank receives the money. Your processor passes it through. That's why two honest processors can't really compete on interchange itself — it's the same wholesale cost for everyone. They compete on the markup they add on top.
The three players
- The card networks (Visa, Mastercard) set the interchange schedule and charge their own small assessment fees.
- The issuing bank (your customer's bank) receives the interchange.
- Your processor / provider moves the transaction and adds a markup for doing so. The markup is the only part that's really negotiable.
Why interchange isn't one number
There are hundreds of interchange rates, not one. What applies to a given sale depends on things like:
- Card type — a basic debit card costs far less than a premium travel-rewards credit card. Those reward points are partly funded by interchange.
- How the card is used — tapped or inserted in person is cheaper than keyed-in or online, because it's lower risk.
- Business type and transaction size.
This is also why "tiered" pricing can work against you: it takes this messy reality and sorts it into a few buckets, then charges you the bucket rate rather than the true underlying cost.
Why this matters for reading a quote
Once you know interchange is a pass-through cost that's the same for every provider, a quote stops being mysterious. The only real question becomes: how much markup is being added on top, and is it stated plainly?
"Interchange + 0.30% + 8¢" tells you the markup exactly. A single blended "2.6%" hides it. Neither is automatically bad — but only one lets you check.
This is why interchange-plus pricing is usually the most transparent model: it separates the wholesale cost from the markup so you can see both.
The Canadian angle
Interchange in Canada isn't static. Following commitments by Visa and Mastercard, interchange on consumer credit cards for eligible small businesses has come down — bringing the average toward roughly 0.95% in-store for those who qualify. Many small merchants are eligible but were never actually moved onto the lower rates. It's a general market fact rather than a statement about your account — but it's a concrete reason to confirm where you stand.
The takeaway
Interchange is the floor everyone pays; the markup is the part that varies and the part worth scrutinising. If you'd like help separating the two on your own statement — seeing the wholesale cost, the markup, and whether it's fair — a free review does exactly that, in plain English and with no obligation.
This guide is general and educational — every business is different. The only way to know your numbers is to look at your own statement. That's exactly what a free review does.