What Are Interchange Fees and Current Regulations?

Interchange Fees

Interchange fees are one of several types of fees that businesses have to pay every time they accept a credit or debit card payment. The cost of interchange fees varies for every card payment, so it can be challenging to know exactly how much you’re paying in fees and why.

In this guide, we’ll explain everything business owners need to know about interchange fees, including how much they cost and how they’re calculated. We’ll also cover current regulations that govern how much you can be made to pay in interchange fees.

What Are Interchange Fees?

Interchange fees are one of several card processing fees that businesses must pay when they accept a credit or debit card payment from a customer.

The interchange fee is paid to the bank that issues the customer’s card. If a customer uses a Visa credit card issued by HSBC, for example, the interchange fee will go to HSBC.

Merchants don’t pay the interchange fee directly to the customer’s bank. Instead, the bank that holds your merchant account will automatically pass on the interchange fee to the customer’s bank when processing an incoming payment for goods or services.

How Much Are Interchange Fees?

You probably won’t see interchange fees listed on your bank statement. That’s because they’re lumped in as part of a single Merchant Service Charge, which also includes card scheme fees (charged by card networks like Visa and Mastercard) and an acquiring markup (charged by your bank).

However, interchange fees make up the bulk up of the Merchant Service Charge. In the UK, the average interchange fee is 0.3% of the transaction total for credit card payments and 0.2% for debit card payments. The average total Merchant Service Charge is 0.55%.

In the US, interchange fees are quite a bit higher. According to payments consultant CMS Payments Intelligence, the average interchange fee in the US is 1.8%.

Interchange fees are set by the card networks, such as Visa and Mastercard, rather than by the card-issuing banks that receive them. Many countries, including the UK, have rules that limit the maximum interchange fee.

Factors That Influence Interchange Fees

A variety of factors determine the interchange fee you’ll pay for a card transaction. Here are the most important ones.

Domestic vs. Cross-border

For businesses in the UK, the most important factor determining your interchange fee is where the customer’s card was issued.

UK regulations cap interchange fees when a UK-based business processes a credit or debit card issued in the UK. However, there are no caps when a UK-based business processes a card issued in another country. So cross-border transactions can carry much higher interchange fees.

Read more on how to accept international payments in our guide.

Credit vs. Debit

Credit cards typically have higher interchange fees than debit cards. This is in part thanks to regulations that set lower maximum fees for debit card transactions.

Online vs. In-person

Transactions in which a card is swiped, dipped, or tapped with a credit card machine are called ‘card present transactions’. Transactions in which a card is keyed in are called ‘card not present transactions’.

Most card networks charge significantly higher interchange fees for card not present transactions, including online purchases.

Card Network

Card networks like Visa, Mastercard, and American Express all set their own interchange fees. So, all other factors being equal, you could pay different interchange fees for a Visa credit card transaction and a Mastercard credit card transaction.

Personal vs. Business Card

Personal credit and debit cards have lower interchange fees than business credit and debit cards.

Merchant Category Code

Every merchant is assigned a four-digit merchant category code based on the type of business they run. Some merchant category codes, like those representing charities or utilities, receive discounted interchange fees.

Current Interchange Fee Regulations

The UK has regulations limiting the maximum interchange fees for domestic transactions. When the merchant and the card-issuing bank are both located in the UK, the maximum interchange fee is 0.3% for credit cards and 0.2% for debit cards. Most major card networks charge these maximum rates for domestic transactions.

However, there are no regulations covering interchange fees for cross-border transactions. Since Brexit, this means that UK merchants can pay much higher fees for transactions involving cards issued in the EU. Mastercard and Visa, for example, charge interchange fees of 1.5% for online credit card transactions between a UK merchant and an EU customer.


Interchange fees make up more than half of the Merchant Service Charge that you pay each time you accept a credit or debit card payment. A number of factors determine how much interchange fees will cost, but the most important for UK merchants is whether the customer’s card was issued in the UK.

Interchange fees for transactions involving UK-issued cards are limited to 0.3% of the total for credit card payments and 0.2% for debit card payments. Interchange fees for cross-border transactions can be up to 1.5%.

Frequently Asked Questions

How do I avoid interchange fees?
There’s no way to avoid interchange fees entirely if your business accepts credit or debit cards. You can lower your interchange fees by encouraging customers to make in-person purchases rather than online purchases. You can also encourage customers to pay with a debit card instead of a credit card.
Who sets interchange fees?
Interchange fees are paid to the banks that issue credit and debit cards. However, the fee rates are set by the card networks, such as Visa and Mastercard. Interchange fees are limited by regulations in many countries, including the UK.
What kind of cards have the highest interchange fees?
Cross-border transactions in which the card is keyed in have the highest interchange fees. For UK businesses, this means that online sales to EU customers can be much more costly to process than in-person sales to UK customers.
Written by:
Michael is a prolific business and B2B tech writer whose articles have been published on many well-known sites, including TechRadar Pro, Business Insider and Tom's Guide. Over the past six years, he has kept readers up-to-date with the latest business technology, corporate finance matters and emerging business trends. A successful small business owner and entrepreneur, Michael has his finger firmly on the pulse of B2B tech, finance and business.