Banking
Interchange Fees
Quick definition
Fee paid by a business's bank to the card-issuing bank on every credit/debit card transaction, typically 1.5-3% of the transaction.
Interchange fees compensate the card-issuing bank for the convenience and rewards of card payments. Rates: 1.5-2% for debit, 2-3% for credit, higher for premium/rewards cards. The merchant's processor passes interchange through plus their markup. On $1M monthly card revenue, ~$25K/month goes to processing fees, meaningful at scale. Interchange-plus pricing models (e.g., Stripe, Adyen) are more transparent than flat-rate (e.g., Square's 2.9% + $0.30).
Frequently asked questions
- What is Interchange Fees?
- Interchange fees compensate the card-issuing bank for the convenience and rewards of card payments. Rates: 1.5-2% for debit, 2-3% for credit, higher for premium/rewards cards. The merchant's processor passes interchange through plus their markup. On $1M monthly card revenue, ~$25K/month goes to processing fees, meaningful at scale. Interchange-plus pricing models (e.g., Stripe, Adyen) are more transparent than flat-rate (e.g., Square's 2.9% + $0.30).
- Why is Interchange Fees important for startups?
- Interchange Fees is a banking concept that matters for startup founders because it shows up in fundraising readiness, financial decision-making, and operational discipline at the stage where mistakes are expensive to undo. Founders who understand it are better prepared for diligence, board meetings, and investor conversations.
- What category does Interchange Fees belong to?
- Interchange Fees is a Banking term in the StartupCFO finance glossary, alongside other banking concepts that founders, CFOs, and accountants use in startup operations and reporting.
- Where can I learn more about Interchange Fees?
- Beyond this definition, see the related banking terms below, or explore StartupCFO's insights and tools that put Interchange Fees in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
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