Glossary
The fee paid by the merchant's processor to the card-issuing bank on each card transaction.
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Short answer: An interchange fee is paid by the merchant's processor to the card-issuing bank on each card transaction. It is the largest part of card processing cost and varies by card type, how the card is taken and the merchant category. Processors pass it through with their own markup.
Key facts
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The fee paid by the merchant's processor to the card-issuing bank on each card transaction.
Interchange is the largest part of card processing cost. It varies by card type, how the card is taken and the merchant category.
It is the base cost of card acceptance and drives pricing models.
A premium rewards card typically costs a merchant more to accept than a basic debit card.
Canadian card networks publish interchange schedules, and processors pass them through with their own markup.
Interchange does not appear directly on a funding review, but processing costs reduce net settlements and are part of margin.
Owners often think the processor sets the whole fee. Most of it goes to the card-issuing bank; the processor's markup is the negotiable part.
On an interchange-plus statement, you will see interchange listed by card type and the processor's markup shown separately. On a flat-rate statement, interchange is bundled into one rate, which is simpler but hides how much each card type actually costs.
Card-present transactions, where the card is tapped or inserted, generally cost less than card-not-present transactions such as online or phone orders, because the fraud risk is lower. Businesses with a large share of phone orders often pay noticeably more in interchange.
Canadian merchants can sometimes reduce effective costs by encouraging debit at the counter, ensuring transactions are processed with the correct merchant category and settling batches daily. The processor's markup, not interchange, is the part worth negotiating.
A Toronto restaurant reviews its processing statement and finds that a growing share of customers pay with premium rewards cards, raising its effective rate even though its processor's markup has not changed. It cannot refuse those cards, but it can confirm it is on transparent pricing, check that tips are processed correctly and make sure its markup is competitive. The effective rate, total fees divided by card sales, is the number to track monthly.
Key takeaway: Interchange is mostly fixed by the networks; the processor's markup and your pricing model are what you can change.
Reviewed by the Merchant Fund Express team on October 12, 2026. Official pages checked as of that date.
Not on card payments, but pricing models change how it is passed through.
See the related guides and the comparison pages, or apply and ask.
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Educational information only. It is not legal, tax or accounting advice.
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