What Is Interchange? Understanding the Foundation of Credit Card Processing Costs

If you’ve ever looked at your merchant statement and wondered where all the fees come from, you’re not alone. One of the most important — and often misunderstood — parts of credit card processing is something called interchange.

At Kelley & Co Strategies, we believe every business owner deserves to understand what they’re paying for. Interchange isn’t just another fee, it’s the foundation of how credit card transactions work.

So, What Exactly Is Interchange?

In simple terms, interchange is the wholesale cost of running a credit or debit card transaction.

Every time a customer uses a card, a portion of that transaction goes to the bank that issued the card — not the processor, not the card brand, and not Kelley & Co Strategies. For example, if your customer uses a Chase Visa card, a portion of that sale goes to Chase as the interchange fee.

This fee helps cover the costs of things like:

• Fraud prevention and security measures
• Transaction handling and authorization
• Risk associated with extending credit to cardholders

It’s an essential part of the system that allows customers to safely and conveniently use their cards anywhere.

Who Sets Interchange Rates?

Interchange rates are set by the major card brands — Visa, Mastercard, Discover, and American Express.

These brands establish hundreds of different rate categories that vary depending on:

• The type of card used (credit, debit, rewards, corporate, etc.)
• The type of business you operate
• The way the card is accepted (in-person, online, keyed, contactless, etc.)

That’s why no two businesses have the exact same interchange costs — even if they’re in the same industry.

Why Interchange Matters to Your Business

When you pay to process a card transaction, that total fee is made up of three main parts:

1. Interchange – Paid to the customer’s bank.
2. Assessment – Paid to the card brand (Visa, Mastercard, etc.).
3. Processor Markup – Paid to the company providing your merchant account.

Of these three, interchange is the largest portion — and it’s also the one most outside your direct control. However, understanding how it works helps you identify where real savings opportunities exist and where they don’t.

Can You Lower Interchange?

You can’t negotiate or change interchange rates directly (Visa and Mastercard set those), but you can make sure your business qualifies for the lowest possible categories by:

• Using up-to-date terminals and technology that capture full transaction data
• Making sure your business type (MCC) is properly classified
• Processing transactions in ways that minimize fraud and risk
• Working with a processor that understands interchange optimization

At Kelley & Co Strategies, we help our clients identify these opportunities, often uncovering cost savings that most providers overlook.

Why Transparency Matters

Unfortunately, not all providers are transparent about what’s interchange and what’s markup. Some lump everything together to make their pricing appear simple, when in reality, it hides the true costs.

We take a different approach. At Kelley & Co Strategies, we break down every component, so you always know where your money is going and how to protect your profit margins. Transparency builds trust, and trust is the foundation of every successful partnership.

The Bottom Line

Interchange isn’t a hidden fee, it’s the backbone of every card transaction. Understanding it gives you the knowledge to make informed decisions and ensures your processing costs are fair and predictable.

Whether you’re a new business owner or managing multiple locations, Kelley & Co Strategies helps you navigate the complexities of payment processing with clarity, transparency, and expertise.

Ready to learn how interchange affects your business?
Request a free statement review today and let us show you exactly where your money goes, and how much you could be saving.