What is Credit Card Interchange Rate?

Many of us dandy credit card users enjoy various benefits that credit cards provide: Cashback, Travel Miles, Extended Warranty on Electronics, Car Rental Insurance to name a few. At the end of the day though, who pays for it?

When a consumer walks in the door of a ice cream shop, pays $5 for a vanilla cone with a MasterCard, the ice cream shop makes a profit of, say $2.50. This consumer is then rewarded a 1% cashback by Mastercard on their next month’s statement. Since the ice cream shop is the beneficiary of this transaction, an Interchange Rate of 0.87% determined by MasterCard (base rate used here for simplicity) is then charged on this ice cream shop through their card payment processor, aka the debit machine company.

Interchange rates vary by card type, industry, volume etc. Official details can be found on Visa, MasterCard, American Express’ websites. Or simply Google “credit card interchange rates”.