What are interchange fees and how do they work?
For card payments, one of the most significant part is known as the "interchange fee". Yet, many businesses don't have a clear view of what it is or how to calculate. That makes it harder for them to understand credit or debit cards, which in turn influence their thinking about card solutions.
Today in this article, we'll be going back to basics, explaining what the interchange fee is and the factors that will decide how interchange fee is calculated.

What is the interchange fee?

After every credit or debit card transaction, businesses need to pay an interchange fee, also known as an interchange reimbursement fee or interchange rate.
Interchange fees, also known as swipe fees or transaction fees, are fees paid by merchants to payment card networks (such as Visa, Mastercard, and American Express) for processing credit and debit card transactions. The fee is typically a percentage of the transaction amount, usually ranging from 1% to 3%.
When a customer uses a payment card to make a purchase, the transaction goes through several steps before the merchant receives the funds. The payment card network plays a key role in this process by facilitating the transaction and processing the payment.

How to calculate interchange fees?

Interchange fees are calculated by payment card networks, such as Visa, and Mastercard, and are usually based on a percentage of the transaction amount. The specific percentage rate for each interchange fee can vary based on a variety of factors.
Here are some of the factors that can influence the calculation of interchange fees:

· Type of payment card: Different payment cards (such as credit, debit, and prepaid) can have different interchange fees.

· Type of transaction: Interchange fees can vary depending on the type of transaction (such as in-person, online, or recurring payments).

· Type of merchant: Interchange fees can differ based on the type of merchant, such as a retail store, an e-commerce site, or a government agency.

· Merchant location: Interchange fees can also vary based on where the merchant is located (e.g., domestic vs. international transactions).

· Size of the transaction: The percentage rate of the interchange fee may be higher or lower for larger transactions.

· Risk factors: Interchange fees may be higher for transactions that are considered higher risk, such as those with a higher likelihood of fraud.


The payment card network sets the interchange fee structure and rates, and they can adjust them periodically. The rates are usually communicated to payment card issuers and acquiring banks, who then pass the costs onto the merchants. Merchants usually pay a discount rate, which is a percentage of the transaction amount, and this rate includes the interchange fee and other processing fees.

How can businesses gain profits with iPeakoin CaaS?

iPeakoin CaaS can empower businesses with the capability to create customized cards for their consumers across the globe. On the one hand, they can earn up to 1.2% of the interchange fees when their customers make payments with iPeakoin cards. On the other hand, cardholders can earn cashback when purchasing with cards, increasing customer loyalty and regaining potential.
Visit our product page or get in touch to learn what iPeakoin can offer.
For more details, or just want to say hi, feel free to send us a note at marketing@ipeakoin.com.
iPeakoin is a licensed FinTech platform that drives the innovation of crypto payments. With a scalable Card-as-a-Service to bring crypto further into mainstream financial services, we help crypto businesses build stronger connections with end users.