What Are Credit Card Processing Interchange Fees?

What is Interchange?

Interchange is a fee paid between banks for the acceptance of card-based transactions. Easy peasy.

Now, why is it important to know?

Knowing interchange and how these fees are applied will help you determine which pricing model will work best for your business when choosing a payment processor.

You might be confused/annoyed when you see the various charges that come with credit card processing. However, they are necessary and you’ll see why. It’s also important to understand how the pricing system works; that way, you can choose a processor that works for you and your business.

By understanding this process, you’ll be able to make a more informed decision on which processor you want to partner with. 

What You Need to Know About Credit Card Processing Pricing Models

There is a list of fees and industry terms you need to know when processing credit card transactions. You’ll need to know the different pricing models and what industries work best with each. 


There are usually three pricing models a business will use to process credit cards: Interchange plus, flat rate, and tiered.


Let’s start from the ground up. An interchange fee is a fee paid to the issuing bank that is paid from the business’ acquiring bank and its payment processor.

In order to process credit cards, interchange fees serve as a way for issuers to charge for using their credit card network. Interchange fees involve a percentage charged by the issuing bank and whatever fee the credit card network imposes, which is typically charged per transaction. These fees vary, depending on what type of deal is worked out between the business and their payment processing partners and the card networks they process through their systems. Each card network follows interchange rates, so these are fees companies must accept to process credit cards.

Credit Card Processing: Interchange Plus

This one is probably the most straightforward. Basically, the card networks (Visa, Mastercard, Discover, American Express) have their fees. That fee is known as interchange. You’ll have to pay this fee no matter what processor you choose. The “plus” is the amount of money the processor charges in addition to the card network interchange fee.


Let’s say that you own a bike store, and you offer online shopping. Let’s ALSO say that you use BillingTree as your credit card processor. If a customer pays for a bike online using their Mastercard, that card network will charge their interchange fee. The processor will likewise charge a fee for their processing software/service. You’ll read why it’s worth it in a bit . . .

Credit Card Processing: Flat Rate

A flat-rate model charges a specific, set amount for each transaction, regardless of the purchase amount. This model is usually good for businesses with high-value, low quantity transactions. If you only sell $2,000 computers, a flat fee might cost you less than one based on a percentage of the purchase amount. 

It’s usually not a good choice for the reverse (low-end retail) since you might be paying more in fees than you would with an interchange-plus model.

Credit Card Processing: Tiered

A tiered pricing model charges based on the amount of each purchase. Typically, the higher the amount of the transaction, the higher the fee. This model usually makes it harder for retailers with a range of different products and prices to calculate how much they’ll pay from month to month.


The processor provides you with valuable tools and features that the card network simply cannot. For example, your payment processing system might need to integrate with your website. You also need to process the other card networks. You ALSO want the interface to be simple for customers to use. You ALSO want to track and store every transaction for future reference/returns. The list goes on and on.

BillingTree’s custom solutions are one of the many reasons businesses choose us over the competition. These solutions are based on the unique needs of your business. 

Contact us today or request a free demo below!