Interchange Fee
Definition
An interchange fee is the portion of a credit card processing fee that the merchant pays to the card-issuing bank on every transaction.
What Interchange Fee Means for Your Business
What it means
Interchange is the wholesale cost of accepting a credit card. It is set by the card networks and collected by the issuing bank, then passed through by the merchant processor along with their own markup.
Why it matters
Interchange plus processor markup is a real line item in every service business. On $3 million in card revenue, it can easily run $60,000 to $90,000 per year. Understanding the breakdown is the first step to negotiating it down.
How contractors use it
Shops with high card volume move to interchange-plus pricing instead of a flat percentage, which exposes the true cost and the processor margin separately. Some add a 3% surcharge on credit cards to recover the fee.
Real-World Example
A plumbing company paid $78,000 per year in card processing at a 3.2% flat rate. Switching to interchange-plus pricing dropped the effective rate to 2.4% and saved $19,500 per year.
Related Terms
Merchant Account
A merchant account is a specialized bank account that allows a business to accept credit and debit card payments from customers.
Transaction Fee
A transaction fee is the per-transaction charge a payment processor adds on top of the percentage rate when a customer pays with a credit or debit card.
Chargeback
A chargeback is a forced reversal of a credit card payment initiated by the customer's bank, usually because the customer disputes the charge.
Customer Financing
Customer financing offers homeowners a loan or payment plan to cover a large repair or replacement, turning a single big invoice into monthly payments.
Accounts Receivable
Accounts receivable is the total amount of money owed to a business by customers for services already delivered but not yet paid.
Put This Into Practice with Free Software
Kaldr Tech handles interchange fee and everything else you need to run your shop. $0/month, 3.5% + 30¢ per transaction.