Interchange fee
Also known as: Interchange, Interchange rate
The interchange fee is what the merchant's acquirer pays the cardholder's issuing bank on each card payment. Where both banks are in the EU, and through the EEA Agreement also Iceland, Liechtenstein and Norway, it is capped at 0.2% for consumer debit and 0.3% for consumer credit.
Last reviewed
Example
Illustrative numbers only. A €100 sale on a consumer debit card carries at most €0.20 of interchange under the EU cap, and at most €0.30 on a consumer credit card. The merchant's total fee is higher, because scheme fees and the acquirer's margin sit on top.
Every card payment carries a fee the merchant never sees on its own line.
The Interchange Fee Regulation defines it as "a fee paid for each transaction directly or indirectly (i.e. through a third party) between the issuer and the acquirer". It flows from the merchant's acquirer to the cardholder's issuer. The acquirer recovers it from the merchant inside the merchant service charge.
Since 2015 the Regulation caps it. Article 3 sets 0.2% of the transaction value for debit card transactions. Article 4 sets 0.3% for credit card transactions. The caps cover consumer cards, and they apply to card payments where both the payer's and the payee's payment service provider are located in the EU, and through the EEA Agreement also in Iceland, Liechtenstein and Norway. The caps do not apply to commercial cards, three-party schemes or cash withdrawals (Article 1(3)), so commercial cards are not capped by the Regulation. When a three-party scheme licenses other providers to issue or acquire, or uses an agent or co-brand partner, the Regulation treats it as a four-party scheme.
For domestic debit, member states may set a lower percentage cap, or instead allow a flat fee of up to EUR 0.05 per transaction (combined with a percentage, the scheme's annual total must stay within 0.2%). For domestic credit they may set a lower cap. Article 5 closes the loophole: rebates, incentives and "net compensation" paid to the issuer count as interchange.
The cap is not the price. The 2020 Commission review states that scheme fees "are not within the scope of the IFR", and the acquirer adds its own margin. A merchant who hears "interchange is capped at 0.2%" and expects a 0.2% rate has heard only part of the story.
Cards issued outside the EU and EEA are not covered by the caps, so a payment from such a card can carry a different interchange fee. Check the statement line by line, or ask the acquirer to show the split.
The cap limits one line of the bill. Not the bill.
