Interchange Fees in 2026: What Merchants Need to Know

Interchange fees remain one of the most misunderstood costs in payment processing. As we start 2026, these fees are at the center of regulatory debates and ongoing litigation. Here’s what you need to understand.

What Interchange Fees Actually Are

Interchange fees are the wholesale costs paid to the card-issuing bank every time a customer uses a credit or debit card. These fees are set by card networks (Visa, Mastercard, Discover, American Express) and vary based on card type, how it’s processed, and your business category.

For 2025, in-person transactions average around 1.70% while key entered and online transactions tend to cost more. Rewards cards cost more than basic cards. Corporate cards are more expensive than consumer cards. Rates change twice yearly, typically in April and October.

Understanding What You Can Control

Interchange rates themselves are set by the card networks and can’t be negotiated. However, a knowledgeable processor may be able help you qualify for lower interchange categories. For example, entering address verification on keyed transactions can move you to a lower rate category. Processing cards properly with EMV readers instead of manually keying them qualifies for better rates.

For most in-person retail businesses, there isn’t much optimization opportunity since swiped or chip transactions already qualify for the best rates. But for businesses doing phone orders, online sales, or B2B transactions, proper data handling can make a real difference. If a processor tells you they can lower your interchange rates, then they should be able to tell you what they are going to do, or need you to do in order to qualify some your transactions at better interchange rates.

What you always control is the markup your processor charges above interchange. This is why interchange-plus pricing is the most transparent model, showing exactly what interchange costs and what your processor adds. That’s not to say other pricing methods are necessarily bad, but we find that they come with less transparency and so its hard if not impossible to know exactly what part of your fees are going interchange and what’s going to the processor.

The Regulatory Battle

The Federal Reserve released data in December 2025 showing interchange fees on debit and prepaid cards hit $34.12 billion in 2023, up nearly 4% annually. Merchant groups argue banks are earning six times their actual costs.

The Fed proposed lowering the cap on regulated debit fees from $0.21 + 0.05% to $0.144 + 0.04% in October 2023, but it’s stuck in legal battles. A federal judge ruled in August that the Fed exceeded its authority, though the decision is stayed pending appeal.

Merchants and card networks reached a settlement in November 2025 to cut credit card rates by 10 basis points for five years. However, major retailers objected, calling it inadequate. These battles have been going on for over a decade with limited results.

How to Minimize Your Costs Now

While regulatory changes may never come, you can reduce your effective interchange costs:

Process Cards Properly: Card-present transactions qualify for lower rates than keyed or online transactions. Use EMV chip readers and accept contactless payments. Settle transactions daily, do not let transactions sit in your payment device for more than 24 hours.

Understand Your Statement: Your processor should be able to show you what fees are being paid as part of interchange and the underlying dues and assessments to the card brands. They should also be able to show you exactly which fees are going to the processor. If they cannot explain the exact interchange or dues and assessments due to the pricing model you are on, feel free to ask them to change your account to interchange plus, where those items can be clearly explained.

Use the Right Pricing Model: Interchange-plus pricing shows exactly what you’re paying. Tiered rates tend to hide actual costs and can result in higher effective rates. Simple Flat rates while are easy to understand have to be designed as a one size fits all solution and will naturally have higher over all costs per transactions.

The Bottom Line

Interchange fees won’t disappear. While merchants push for lower rates through regulation and litigation, card networks have successfully defended their fee structures for decades.

Your best strategy is understanding how interchange works, making sure transactions qualify for the lowest rates possible, and working with a processor who uses transparent interchange-plus pricing. Don’t let a processor hide interchange costs or claim they can negotiate these fees.

If you have questions about how interchange fees affect your business or want to understand what you’re actually paying, we’re here to help.