Visa, MasterCard, and other card issuers all set their own interchange rates, but most of them set those rates higher or lower depending on your merchant category code — a four-digit number used to identify your business type. Typically, merchant categories where chargebacks are less common get a lower interchange rate than categories where chargebacks are more likely.
Government agencies and utility companies, for example, usually get lower visa interchange rates because they experience little to no chargebacks. Here are some of the other merchant categories that enjoy lower interchange fees:
Which Merchant Categories Have the Lowest Interchange Rates?
In addition to government agencies and utilities, some other merchant categories where Visa interchange rates are lower include:
- Charities and religious organizations
- Nonprofit organizations
- B2B Businesses
While there is a lot of overlap between different card issuers, they don’t always charge lower rates for the same categories. MasterCard, for example, doesn’t offer a lower rate for B2B transactions like Visa does.
This can make it tricky to estimate your exact interchange fees, because you might qualify for a lower rate for one card issuer but not another.
How to Get Special Interchange Rates
Technically, merchants don’t pay interchange fees. The bank where your merchant account is held pays them. Of course, those costs typically get passed on to you in the form of processing fees so they still impact your bottom line. Here are a few tips for making sure you get the lowest interchange rate your business qualifies for — and that you actually benefit from that lower rate.
Choose a Payment Processor with Interchange-Plus Pricing
Interchange-plus pricing is one of the most transparent fee structures you’ll find in the payment processing world. Rather than a flat rate, fees vary based on the actual interchange rate that was charged for each transaction. So merchants pay whatever the interchange fee was plus a small processing fee that goes to the payment processor.
While a flat rate might seem easier to work with, it can easily be used to disguise just how much extra that processor is charging you for each transaction. If you qualified for Visa’s special supermarket interchange rate of 1.15% + $0.05, for example, those savings won’t be passed onto you in a flat rate fee structure. You’re charged the same rate regardless of what the interchange rate is for any given transaction.
Even merchants that don’t qualify for special interchange rates can usually end up saving money by switching to a processor with interchange-plus pricing. Standard interchange fees can vary between 1.4% and 3.5% depending on card issuer and transaction type. But processors that use flat rate pricing typically set that rate closer to the highest possible interchange fee—which means you pay the higher rates even for transactions where the interchange fees were lower.
Update Your Merchant Category Code
Card issuers decide whether or not your business qualifies for a lower interchange rate based on your merchant category code (MCC). So it’s important to make sure the code they assign is the most accurate one possible. That can be tricky, especially for merchants who overlap different industries.
If you don’t know your MCC, contact your payment processor to help you find out what code was assigned to your business. If that code doesn’t seem accurate, or your business overlaps different industries, you might need to work with them to update your MCC or assign multiple MCCs for each overlapping industry.
Frequently Asked Questions
Here are some answers to other questions you might have about interchange rates and how they are set.
In 2023, Visa interchange rates ranged from 0.05% to 3.15% depending on card type, transaction type, merchant category, and other criteria. You can find a full list of the latest Visa interchange rates here.
Typical interchange fees usually hover between 1.5% and 2% for credit cards and 0.5% for debit cards. However, there is a lot of variation between different card issuers. Visa’s standard interchange rates, for example, averages 1.4% to 2.5% while American Express charges between 2.3% and 3.5% on average.
This variability is why interchange-plus pricing can potentially save merchants so much money, even if they don’t qualify for special interchange rates. Square charges merchants 2.6% across the board for card present transactions, even though Visa only charges between 1.15% and 2.5%. So even at the highest merchant category, you’re paying more for any Visa transaction you process than the card issuer actually charged.
Each card issuer sets their own interchange fees. While regulators do have some laws around those fees, they are generally free to set that percentage as high or low as they like. The federal reserve caps debit card interchange fees at 0.05%, for example, so card issuers legally can’t set their rates above that in the U.S.
In the European Union, credit card interchange fees are also capped, currently at 0.3%. But the United States currently has no cap on credit cards, which is why average credit card interchange rates tend to be so much higher here.
Most interchange fees are set as a percentage of the transaction plus a small flat fee. For example, 1.4% + $0.05. To calculate the dollar amount of the interchange rate that was charged, multiply the total purchase price, including sales tax and any other costs added to the purchase, by the percentage. Then add the flat fee to that amount.
For example, say, your customer paid a total of $55.00 including tax, for a product. If the interchange rate is 1.4% + $0.05, your math would look like this:
(55 x 0.014) + 0.05 = $0.82
The 0.014 is the 1.4% written as a decimal.
However, as mentioned earlier, the exact rate can vary, even for the same card issuer depending on the transaction type, your merchant code, and the card type. So it can be tricky to figure out exactly which rate was charged for each transaction you processed.
As complicated as it is, it can be useful to try to at least get an estimate if you’re currently working with a payment processor that charges a flat rate. To do that, split up your transactions by card issuer and then calculate just using the standard interchange rate charged by each issuer. This won’t be an exact match to the actual fees that were charged, but it should be close enough to give you an idea of how much higher your processor’s flat fee is compared to the interchange fees.
If you don’t want to do that math, you can use National Processing’s pricing calculator. Just input your industry type along with your processing volume, number of transactions, and total processing fees you paid last month. Then, you’ll immediately be able to see approximately how much you would have paid last month under National Processing’s interchange-plus fee structure.