---
title: "Interchange Fee"
url: "https://mahouse.world/glossary/interchange-fee"
type: "glossary term"
topic: "Payments pricing"
author: "Ihor Vlasov"
reviewed: "2026-09-20"
published: "2026-08-10"
---

# Interchange Fee

An interchange fee is the fee the merchant's acquirer pays the cardholder's issuing bank on every card transaction, set by the card network as a percentage of the amount plus a fixed sum, to compensate the issuer for the credit risk, fraud and cost of running the card. It is the largest component of what a merchant pays to accept cards, and the main revenue of an issuing fintech.

**Also known as:** Interchange, Issuer fee, IF

## Key facts

- **Used at:** every card transaction; flows from acquirer to issuer through the network
- **Regulated:** capped in the EU and UK at 0.2% for consumer debit and 0.3% for consumer credit since 2015; uncapped on commercial cards and on cards issued outside the region
- **US:** debit capped for large banks under Durbin (about 21 cents plus 0.05%); credit uncapped, typically 1.5–2.5%
- **Who earns it:** the issuer — a bank, or a fintech issuing under a BIN sponsor
- **In a valuation:** the revenue line most exposed to regulation, and the one to stress-test

## How an interchange fee works in practice

A cardholder pays €100 at a merchant. The merchant's acquirer sends the transaction to the issuer through the network; when it settles, the issuer keeps the interchange — €0.20 on a European consumer debit card, €0.30 on a credit card, considerably more on a US credit card or a commercial card — and passes on the rest. The acquirer adds the network's scheme fees and its own margin and charges the merchant the total as its merchant service charge. The merchant sees one number; inside it, interchange is the part nobody in the chain except the network can change.

For an issuing fintech interchange is the business model. A neobank or a prepaid programme earns 0.2% of everything its customers spend on debit cards, which is why every such company reports "spend" as its key metric and why a card that is used for a €3,000 monthly salary generates €6 of interchange a month — enough to run an account, not enough to run a company. Commercial cards, where the cap does not apply, and US cards, where credit interchange is unregulated, are why business-expense fintechs and US neobanks earn several times more per card.

Because the rate is set by regulation and the network, an interchange-dependent business carries a risk it cannot manage: a cap extended to commercial cards, a change to the US debit rules, a network re-pricing. A buyer of such a business models each of those as a scenario, and the price reflects the spread.

## Example

A European business-spend fintech issues commercial cards under a BIN sponsor. Its customers spend €900m a year; commercial-card interchange averages 1.4%, so interchange revenue is €12.6m, of which the sponsor takes 0.15% of volume (€1.35m) and the network's fees take €0.9m. Net interchange of €10.35m is 78% of revenue. A buyer's base case values the company at €95m; a scenario in which the EU extends the 0.3% cap to commercial cards cuts revenue by €9.9m and the value to €30m, and the earn-out is structured so that the sellers share that risk.

## Common mistakes

- Valuing an interchange business without a scenario for the cap being extended.
- Modelling consumer-card interchange rates on a commercial-card portfolio, or the reverse.
- Forgetting the sponsor's and the network's share, which turn 1.4% into 1.15%.
- Treating US and European interchange as the same economics: they differ by a factor of five.
- Confusing interchange (the issuer's) with the merchant service charge (the acquirer's price to the merchant).

## Related terms

- [Card Network](https://mahouse.world/glossary/card-network.md)
- [Chargeback](https://mahouse.world/glossary/chargeback.md)
- [E-Money](https://mahouse.world/glossary/e-money.md)
- [Decline Rate](https://mahouse.world/glossary/decline-rate.md)
- [Smart Routing](https://mahouse.world/glossary/smart-routing.md)
- [Neobank](https://mahouse.world/glossary/neobank.md)

— Ihor Vlasov, M&A FinTech Expert. Last reviewed 2026-09-20. https://mahouse.world/authors/ihor-vlasov