Four parties touch a card payment. The cardholder, the issuer that gave them the card, the merchant, and the acquirer that signed the merchant up. The card scheme sits in the middle and sets the rules. When the money settles, the acquirer keeps a margin, the scheme takes its own fees, and the largest single component in most transactions goes to the issuer. That component is interchange.
Interchange is not negotiated between merchant and acquirer. It is published by the schemes in rate tables that run to dozens of pages, sliced by card type, by whether the transaction was in person or online, by merchant category, and by the country of the issuer relative to the country of the acquirer. Two identical deposits at the same firm on the same day can carry very different interchange because one client used a domestic consumer debit card and the other a corporate card from another continent.
What the fee is supposed to pay for
The official rationale is that the issuer carries costs the merchant benefits from: fraud losses, the funding period between the cardholder's purchase and their statement date, authorisation infrastructure, and the customer relationship that makes the card worth carrying. In practice interchange also funds cardholder rewards, which is why premium and reward cards historically sat at the higher end of the tables and why merchants who accept them pay for the airline miles their customers collect.
The European Commission concluded that the market did not discipline these rates and legislated. The Interchange Fee Regulation caps interchange on consumer debit at 0.2 percent of transaction value and consumer credit at 0.3 percent for card payments within the European Economic Area. The United Kingdom carried equivalent caps into domestic law after leaving the European Union.
The transactions that escape the caps
This is where merchant cost actually lives, and it is the part a summary of the regulation usually skips. The caps apply to consumer cards issued and acquired inside the region. Everything outside that description is priced by the scheme without a legal ceiling:
- Commercial, corporate and purchasing cards, which fall outside the consumer definition entirely.
- Inter-regional transactions, where the cardholder's issuer sits outside the region of the acquirer, which is the normal case for a broker with clients across several continents.
- Cards issued under three-party schemes, where the same organisation is both issuer and acquirer and the interchange concept does not apply in the same form.
- Scheme fees, which are charged separately by the card networks to acquirers and issuers and are not covered by the caps at all.
The scheme fee point matters more each year. Because interchange is capped domestically, the networks' own fee schedules have become the flexible part of the cost stack, and they are numerous, small and hard to audit. Our breakdown of the merchant discount rate takes one settlement statement apart line by line.
Blended and interchange plus
An acquirer can quote you two ways. Blended pricing gives a single percentage for every transaction, so a domestic debit card and a foreign corporate credit card cost you the same and the acquirer keeps the difference on the cheap ones. Interchange plus, sometimes written interchange plus plus, itemises the interchange, the scheme fees and the acquirer's own margin as separate lines.
Unbundled pricing is almost always the right choice for a firm with international clients, because it is the only structure where you can verify the charge against a published table and see which markets are expensive. The catch is that a variable cost is harder to forecast, and a merchant on interchange plus who sees a cost spike after running a campaign in a new country will usually find the answer in the issuer mix rather than in anything the acquirer did.
Surcharging rules differ by country. Several jurisdictions prohibit passing card costs to consumers on regulated cards, and the schemes have their own rules on top of the law. Check both before adding a deposit fee, and check whether your regulator treats a deposit surcharge on a trading account as a cost disclosure issue.
Why trading firms sit at the wrong end of the table
Interchange varies by merchant category, and financial services categories do not attract the friendly rates that supermarkets do. The client base compounds it: a broker or prop firm with clients spread across dozens of countries is running a book that is heavily inter-regional, which means capped rates apply to a minority of the volume. Add the risk pricing described in our piece on high-risk merchant accounts and the all-in cost per deposit is a genuine line item rather than a rounding error.
What can a firm actually control? Not the interchange, but the mix. Offering rails that avoid cards entirely for larger deposits changes the average, since bank transfer and open banking initiation carry a fixed cost rather than a percentage, which flips the economics above a certain ticket size. Declines and retries also cost money, because a failed authorisation can still attract a fixed fee, so improving approval rates reduces the fee load as well as the abandonment.
The last controllable is data quality on the authorisation. Sending complete address and cardholder data, authenticating where the transaction qualifies, and correctly identifying recurring transactions all affect which interchange category a payment lands in, and a payment that downgrades to a more expensive category because a field was missing is a self-inflicted cost. That configuration lives in the payment integration rather than in the contract, which is why the routing and provider settings belong in the same system that holds the client record, as they do in our Broker CRM.
None of this is negotiable in the way a founder expects. You cannot ask an acquirer to charge you less interchange, because the acquirer does not keep it. You can move volume between card types and rails, verify that you are being charged the published rate plus an agreed margin, and revisit the margin once you have a processing history worth showing.
"Founders spend a week arguing over ten basis points of acquirer margin and never look at the issuer mix, which is where the real money went."
— Roman Onta, Executive Director, SINGUARD
Key Takeaways
- Interchange goes to the card issuer, is set by the scheme and cannot be negotiated by the merchant or the acquirer.
- EEA caps of 0.2 percent on consumer debit and 0.3 percent on consumer credit apply only to consumer cards issued and acquired inside the region.
- Commercial cards, inter-regional payments and scheme fees sit outside the caps, which is most of the volume for a firm with international clients.
- Interchange plus pricing is the only structure that lets you audit the charge; blended pricing hides where the cost came from.
Frequently Asked Questions
Who actually receives the interchange fee?
The card issuer, meaning the bank or fintech that gave the cardholder the card. The acquirer deducts it from the merchant's settlement and passes it to the issuer through the scheme. It funds the issuer's fraud losses, funding costs and cardholder rewards, which is why premium reward cards historically carried higher interchange than basic ones.
Are all interchange fees capped in Europe?
No. The Interchange Fee Regulation caps consumer debit at 0.2 percent and consumer credit at 0.3 percent of transaction value for card payments inside the European Economic Area. Commercial and corporate cards fall outside the caps, and so do transactions where the card was issued outside the region, which is why a payment from an overseas cardholder can cost several times more.
Should I take blended or interchange plus pricing?
Interchange plus shows the interchange, the scheme fees and the acquirer margin as separate lines, so you can see what you are actually paying and check it against published tables. Blended pricing gives one rate for everything, which is simpler and usually more expensive on cheap domestic debit. If your card mix is mostly regulated consumer cards from one region, blended can be competitive; if it is international, unbundled pricing is the only way to see where the cost is going.