If your business accepts credit or debit card payments, interchange fees are part of your daily reality—whether you’re aware of them or not. These fees, often referred to as “swipe fees,” are charged every time a customer pays with a card.
And while they might seem like a small percentage of each transaction, they can add up to tens of thousands of dollars in annual costs—especially for high-risk businesses.
In 2023 alone, U.S. businesses paid $172 billion in card processing fees, with interchange fees accounting for 70% to 90% of those costs.
For many businesses, especially those operating in high-risk or high-volume industries, failing to understand and manage these fees can result in significant profit loss.
At Corepay, we specialize in payment processing for high-risk merchants—industries often underserved by traditional providers. In this guide, we’ll break down what interchange fees are, how they work, and, most importantly, how your business can reduce them.
What Are Interchange Fees?
Interchange fees are transaction fees paid from the acquiring bank (the business’s bank or payment processor) to the issuing bank (the customer’s bank) every time a card payment is processed.
These fees are set by the major card networks—Visa, Mastercard, Discover, and American Express—and are meant to compensate the issuing bank for handling the transaction, covering fraud risk, and managing cardholder accounts.
This fee is typically a combination of a percentage of the transaction (e.g., 1.80%) plus a flat fee (e.g., $0.10). These amounts vary widely depending on the card type, transaction method, and industry.
Why Interchange Fees Exist
- Issuing Bank Compensation: Covers the cost of issuing cards, managing accounts, and the credit risk taken on during the transaction.
- Cardholder Incentives: Helps fund rewards programs, cashback offers, and other cardholder benefits.
- Network Maintenance: Supports the card networks’ infrastructure, fraud detection systems, and security operations.
- Transaction Risk Coverage: High-risk verticals often face steeper fees due to a higher potential for chargebacks and fraud.
Interchange vs. Other Fees
Interchange fees are just one part of your overall payment processing cost. You’ll also encounter assessment fees (charged by the card networks) and payment processor markups.
While you can’t avoid interchange fees altogether, you can optimize how they’re assessed and managed—and that’s where Corepay comes in.
How Are Interchange Fees Calculated?
Interchange fees aren’t one-size-fits-all. They’re calculated using a complex formula based on multiple variables—some of which are within your control.
While the exact rates are set by card networks and published semi-annually, the final fee for each transaction depends on several key factors:
1. Card Type
Premium cards with rewards programs (e.g., airline miles, cashback) often carry higher interchange fees. Debit cards, especially PIN-based ones, usually have lower fees due to reduced risk and processing costs.
2. Transaction Method
Card-present transactions (in-store, using chip or tap) are seen as lower risk and tend to incur lower fees. In contrast, card-not-present (CNP) transactions—such as those done online or over the phone—are more susceptible to fraud, leading to higher interchange fees.
3. Merchant Category Code (MCC)
Each business is assigned an MCC that reflects its industry. Interchange rates vary by MCC, with some sectors (e.g., nonprofits or utilities) receiving preferential rates, while others—like adult, subscription services, or travel—may face elevated fees.
4. Transaction Size
Interchange is typically charged as a percentage + flat fee. That means larger transactions result in higher total interchange costs, though the percentage rate may stay the same.
5. Processing Method
How you process the transaction matters:
- Manually entered card data = higher risk = higher fee
- Tokenized or encrypted data = lower risk = potential for lower fee
- Delayed settlement or missing transaction data can also increase fees
Interchange Pricing Models
How much you pay in interchange fees doesn’t just depend on the transaction — it also depends on your payment processor’s pricing model.
The model your processor uses determines how interchange fees, card network fees, and processor markups are bundled and billed.
We offer transparent pricing designed specifically for high-risk and high-volume merchants. Here’s how the most common pricing models work — and how they stack up for different types of businesses:
1. Interchange-Plus Pricing (a.k.a. Cost-Plus)
This model passes the exact interchange fee directly to the merchant, plus a small, fixed markup set by the processor.
- Most transparent
- Ideal for businesses with high volume
- Costs vary with each transaction
We frequently recommend interchange-plus pricing for established merchants who want full visibility and control over their fees.
2. Tiered Pricing
Transactions are bundled into tiers — typically “qualified,” “mid-qualified,” and “non-qualified” — based on card type and transaction method.
- Lacks transparency
- Hard to predict costs
- Often results in higher fees overall
Processors rarely disclose how transactions are categorized, making it difficult to audit or compare rates.
3. Flat-Rate Pricing
You pay one flat percentage and/or fee per transaction — regardless of card type, MCC, or other factors.
- Simple and predictable
- Can be more expensive
- Popular with startups or low-volume businesses
4. Subscription or Membership Pricing
You pay a monthly fee for access to wholesale interchange rates, plus a low per-transaction fee.
- Lower per-transaction costs
- Requires consistent volume to be cost-effective
- Transparent, hybrid model
Which Pricing Model Is Best?
There’s no one-size-fits-all answer. It depends on:
- Your monthly processing volume
- Average ticket size
- Industry risk level
- Card mix (debit vs. credit vs. rewards)
Corepay works with each client individually to structure pricing that balances savings, predictability, and compliance — especially in high-risk verticals where many providers fall short.
How Do Interchange Fees Work?
Every time your customer pays with a credit or debit card, there’s a behind-the-scenes process that happens in seconds — and interchange fees are baked into every step.
While invisible to the buyer, this flow is critical to how money moves from the customer’s bank account to your business bank account.
Here’s a simplified breakdown of how interchange fees work in a typical card transaction:
1. Purchase Initiated
A customer makes a purchase using a credit or debit card on your website, POS terminal, or mobile app. This request is sent to your payment processor (the acquiring bank or gateway).
2. Authorization Request
Your processor sends the transaction details to the card network (Visa, Mastercard, etc.), which routes the request to the cardholder’s issuing bank.
3. Bank Approval
The issuing bank checks the cardholder’s account to verify:
- Available credit or funds
- Fraud concerns
- Card validity
If approved, the authorization is sent back through the network to your processor, then to your business, allowing the sale to go through.
4. Settlement & Clearing
At the end of the business day, your processor groups approved transactions into a batch and submits them for settlement. The card network routes each transaction to the correct issuing bank.
5. Interchange Fee Applied
The issuing bank deducts an interchange fee from the total transaction amount and transfers the net amount to the acquiring bank.
6. Business Receives Funds
You receive the remaining amount in your business bank account, minus:
- Interchange fees (paid to the issuing bank)
- Assessment fees (paid to the card network)
- Processor markup (paid to your payment processor)
Why It Matters
For every card transaction you accept, you don’t receive the full amount charged to the customer — interchange fees are automatically deducted in the process.
And for high-risk businesses, those fees may be significantly higher due to increased fraud risk, chargebacks, and industry-level regulation.
That’s why choosing the right processor matters. At Corepay, we help you optimize every part of this flow — from MCC classification to transaction security — to reduce your effective cost and ensure you’re not overpaying for each swipe or click.
How Interchange Fees Affect Businesses
Interchange fees may seem like just another line item on your processing statement — but over time, they can have a significant impact on your business’s profitability, pricing strategy, and cash flow.
For high-risk merchants, the stakes are even higher, as interchange fees are often elevated due to increased risk and scrutiny from banks. Here’s how interchange fees can affect your business:
1. Operating Costs
Interchange fees make up the largest portion of your card processing costs. If your business relies heavily on card payments — especially online — these fees can quietly eat away at your profit margins.
For high-volume merchants, even small percentage differences can result in tens of thousands in lost revenue annually.
2. Pricing Strategy
To offset interchange fees, many businesses build those costs into their pricing — either by raising prices, setting minimum transaction amounts, or charging surcharges for credit card payments (where legal).
While this can protect margins, it can also influence how customers perceive value or decide to pay.
3. Cash Flow Management
Since interchange fees are deducted before funds are deposited, they can reduce the actual revenue you receive from each transaction.
This affects how you forecast income, manage working capital, and plan for recurring expenses like inventory or payroll.
4. Business Model Adjustments
Some businesses actively encourage debit card or ACH payments — which typically carry lower interchange fees — to reduce costs. Others may avoid accepting high-fee cards altogether or incentivize non-card payments (e.g., offering a cash discount).
5. Payment Processor Selection
The way your processor handles interchange (and how transparent they are) can have a huge impact on your long-term cost structure.
Some processors bundle fees into hard-to-decipher flat rates or tiers, which can obscure what you’re really paying.
Others, like Corepay, offer interchange-plus pricing with full transparency, so you always know what you’re being charged and why.
The Corepay Difference
If you’re in a high-risk vertical — like adult, CBD, nutraceuticals, subscription billing, or online gaming — you’re already facing higher base rates from card networks and acquiring banks.
Corepay helps reduce the impact of interchange by classifying your business correctly to avoid inflated MCC rates, optimizing settlement and data handling, helping you stay compliant, and connecting you with acquiring banks that understand your industry.
How Businesses Can Reduce Interchange Fees
While you can’t eliminate interchange fees altogether, understanding how they work — and how to manage them — can lead to significant savings over time.
Especially for high-risk businesses, small optimizations can add up quickly. Below are several proven strategies to reduce interchange fees, backed by Corepay’s industry expertise.
Work With a Transparent Payment Processor
The processor you choose directly impacts how much you pay in interchange fees.
Many providers use flat-rate or tiered pricing models that obscure the real cost of each transaction, often bundling higher interchange fees into broader categories with added markups.
At Corepay, we offer customized pricing models — including interchange-plus — to give you full visibility into your fees. This transparency allows you to track true costs and identify areas where you may be overpaying.
Settle Transactions Quickly to Avoid Penalties
Timing matters. Interchange rates can increase when transactions are not settled within a specific window — usually 24 hours. Delayed settlement is viewed as higher risk by the card networks, which often leads to additional fees.
Ensuring that your transactions are batched and settled on time helps prevent these unnecessary charges. Corepay’s system is designed to streamline this process and ensure settlements occur promptly.
Leverage Level 2 and Level 3 Data for B2B Transactions
If your business processes corporate or government payments, including Level 2 or Level 3 data can significantly reduce interchange rates.
These enhanced data levels provide card networks with more detailed transaction information, such as tax amounts, invoice numbers, and line-item breakdowns.
Corepay supports Level 2 and Level 3 processing and can help you integrate these fields into your checkout flow or invoicing system to unlock lower rates.
Implement Secure Payment Technologies
Card networks assign interchange rates based partly on transaction risk. Secure transactions are less likely to be flagged for fraud and can qualify for better rates.
Technologies like EMV chip readers, 3D Secure authentication, tokenization, and point-to-point encryption reduce fraud risk and show card networks that you’re operating with security best practices.
Corepay helps businesses implement these tools to lower risk and, in turn, reduce costs.
Encourage Lower-Cost Payment Methods
The type of card your customer uses affects the interchange fee. Debit cards — especially PIN-based ones — generally carry lower fees than credit cards, particularly premium or rewards cards.
Similarly, ACH payments and eChecks offer some of the lowest-cost options. In certain states or industries, you may also be allowed to add a surcharge for credit card transactions or offer a discount for cash payments.
Corepay provides guidance on when and how to implement these strategies legally and effectively.
Regularly Review Your Processing Statements
Interchange rates are updated twice a year, and your fees can change without notice. Monitoring your processing statements on a monthly basis is key to staying informed.
Look for shifts in card usage trends, unexpected fee increases, or transactions being downgraded to higher-cost categories.
Corepay offers free processing audits to help you identify discrepancies, hidden markups, or opportunities to qualify for lower rates.
Partner With a Processor That Understands High-Risk Industries
High-risk merchants face unique challenges when it comes to interchange — from elevated chargeback ratios to strict compliance requirements.
Corepay specializes in working with businesses in industries like adult, nutraceuticals, CBD, subscription services, and more.
We help our clients optimize their payment systems to qualify for the lowest possible interchange rates, while ensuring compliance with card network rules and regulations.
Interchange Fees Don’t Have to Drain Your Margins
Interchange fees are an unavoidable part of accepting card payments — but they don’t have to be a mystery, or a major cost center.
By understanding how these fees work and making informed decisions about how you process payments, your business can gain more control over its expenses, improve profitability, and stay competitive in any industry.
For high-risk merchants, these optimizations are even more important. Card networks and acquiring banks often treat your business differently — with stricter risk assessments and higher fees.
That’s why working with a processor that understands your space isn’t just helpful — it’s essential.
Ready to Reduce Your Interchange Costs?
At Corepay, we specialize in helping high-risk and hard-to-place businesses lower their processing fees through smarter technology, compliant surcharging strategies, and transparent pricing.
