Pricing
Interchange Fee
Definition
Interchange Fee the fee paid by the acquiring bank to the issuing bank each time a card transaction is processed. Set by card networks (Visa, Mastercard), interchange varies based on card type (debit vs credit, rewards vs standard), merchant category code, transaction type (card-present vs card-not-present), and geography. Interchange typically represents the largest component of payment processing costs, ranging from 0.2% for regulated debit to 2%+ for premium rewards cards.
Related Terms
Assessment Fee
A fee charged by card networks (Visa, Mastercard, Amex) on every transaction for using their network infrastructure and brand. Also called scheme fees or network fees. Assessment fees are typically a small percentage of transaction volume (0.13-0.15% for Visa/Mastercard) plus per-transaction fees. Unlike interchange which goes to issuers, assessments go directly to the card networks.
Merchant Discount Rate
The total percentage fee a merchant pays for accepting card payments, encompassing interchange, scheme fees, and acquirer markup. Often shortened to MDR. In blended pricing models, this is presented as a single rate (e.g., 2.9%). In IC++ pricing, the components are itemized separately. MDR varies significantly by merchant risk profile, volume, and negotiating power.
Interchange Plus Plus (IC++)
The most transparent pricing model in payments, breaking costs into three components: actual interchange (paid to issuer), scheme fees (paid to card networks), and acquirer markup (the processor's profit). Merchants see exactly what each transaction costs and can optimize accordingly. IC++ typically benefits larger merchants ($100K+/month) with diverse card mixes and becomes available at higher volumes.
Scheme Fees
Fees charged by card networks (Visa, Mastercard) for various services beyond the basic assessment. Includes authorization fees, clearing fees, cross-border fees, data usage fees, and program fees. Scheme fees have grown significantly in recent years and can add 0.1-0.3% to transaction costs depending on geography and transaction characteristics. Often bundled or passed through as part of IC++ pricing.
Acquirer Markup
The fee charged by the acquiring bank or payment processor for their services, representing their profit margin on transactions. In IC++ pricing, this is the only negotiable component. Typically expressed as a percentage plus fixed fee (e.g., 0.2% + $0.10). Markup varies by merchant risk, volume, vertical, and competitive factors.
See Also
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