Interchange is the fee paid to the bank that issued your customer's card, and it is usually the largest part of every card processing fee.
Card networks publish interchange tables, and the rate depends on card type, whether the card was present, and merchant category. In the Avendo Rate Guide, interchange is the first of three layers. The second is the network assessment. The third is the processor markup, the only layer processors compete on.
Three layers
Layer 1
Paid to the issuing bank. It rewards the bank for extending credit, covering fraud risk, and funding card rewards. Rates vary by card: premium rewards cards and business cards generally carry higher interchange than basic debit cards, and online payments generally carry more than in-person ones.
No processor can lower interchange for you. It passes through regardless of who processes the sale.
Layer 2
Paid to the card network, such as Visa or Mastercard, for running the rails that connect your processor to the issuing bank. Assessments are usually a small percentage of volume plus some per-item fees.
Like interchange, they are set by the network and are generally the same whichever processor you use.
Layer 3
Kept by the processor for authorizing, settling, and supporting your payments. NerdWallet gives an interchange-plus markup example of 0.4% plus 8 cents.
This is the layer that differs between processors, and it is where Avendo routing operates: each transaction goes to the processor offering the best available rate at that moment.
Statements
On an interchange-plus statement, look for line items labeled interchange or pass-through, a separate group for network or assessment fees, and a third group for processor, service, or discount fees. That third group is your markup.
On flat-rate or tiered statements, all three layers are blended into one rate, so you cannot see the markup directly. Divide total fees by total volume to get your effective rate, then compare it with the 1.5% to 3.5% range NerdWallet reports. To see how blended and pass-through models compare side by side, use the pricing models comparison, or estimate a quote on the credit card processing cost page.
Back to the full guide: credit card processing rates and fees explained.
FAQ
Interchange is the fee paid to the bank that issued the customer card. Card networks publish interchange tables, and the rate depends on things like card type, whether the card was present, and the merchant category. It is usually the largest part of a card fee, and no processor can remove it.
More in the FAQAn assessment fee is what the card network, such as Visa or Mastercard, charges for using its network. It is typically a small percentage of volume plus some per-item fees. Like interchange, it is set by the network rather than your processor, so it is generally the same whichever processor handles the payment.
More in the FAQThe markup is the processor margin added on top of interchange and assessments. It is the part of the fee that differs between processors. NerdWallet gives an example of an interchange-plus markup of 0.4% plus 8 cents per transaction. On flat-rate plans, the markup is built into a single blended price.
More in the FAQThe issuing bank collects interchange, which is the largest share of each card fee, while the network and processor take the rest. The Small Business Payments Alliance reports that retailers pay an average of 2.3% per credit card transaction to issuers, networks, and acquirers together. Your own figure depends on your card mix.
More in the FAQFind total sales volume and total fees, then divide fees by volume to get your effective rate. Next, look for line items labeled interchange, assessments, and processor or service fees. If everything is blended into one line, you are likely on flat-rate or tiered pricing.
More in the FAQWhen a customer pays, the checkout sends the card details through a gateway to a processor, which asks the card network and issuing bank to approve the charge. Approved payments are later batched and settled into your bank account, minus fees. Avendo adds a routing layer that chooses which processor handles each transaction.
More in the FAQAvendo puts processors in competition for the markup on every transaction from your checkout.