Card processing fees: interchange-plus, tiered, what's negotiable

Interchange is fixed. The processor's markup isn't. How a multi-location CFO reads a statement, finds the markup and gets on the right pricing model.

Most multi-location CFOs know their card processing bill is large. Fewer can say how much of it is negotiable. The answer is: less than the processor's sales rep implies, and more than most finance teams negotiate.

Start with one sentence from Visa's own interchange schedule: "Merchants do not pay interchange reimbursement fees; merchants pay 'merchant discount' to their financial institution." Your bill is interchange, which goes to the card issuer, plus network fees, which go to Visa and Mastercard, plus whatever your processor adds. Only the last part is yours to negotiate. The skill is seeing it.

What is not negotiable

Interchange. The networks publish it, and it is large. Visa's schedule effective October 24, 2026 sets card-present retail credit for basic consumer cards at 1.43% to 1.51% plus 10 cents, depending on the merchant's performance threshold. A traditional rewards card in the same transaction costs 1.65% plus 10 cents, and a Visa Signature Preferred card 2.10% plus 10 cents. A Visa Infinite card that meets the spend test costs 2.30% plus 10 cents. Commercial cards present at the counter run 2.50% plus 10 cents.

Debit is different, for now. Regulation II caps debit interchange for issuers with $10 billion or more in assets at 21 cents plus 0.05% of the transaction, plus a 1 cent fraud adjustment. Federal Reserve data for 2024 shows an average of 23 cents (0.47%) on covered transactions against 51 cents (1.21%) on exempt transactions from smaller issuers. Visa's own CPS/Retail rate for exempt debit is 0.80% plus 15 cents.

That cap is now in play. On October 26, 2026, the Eighth Circuit affirmed a district court ruling that Regulation II was unlawful because the Fed counted costs Congress excluded. The current cap stays in place until the court's mandate issues, and analysts expect the Fed to start on a replacement. The Fed's 2023 proposal would have cut the base to 14.4 cents. Expect debit costs to move, and make sure your contract passes any reduction through to you.

Network fees. Assessment and network fees set by Visa and Mastercard. Pass-through, not negotiable for a mid-size merchant.

What is negotiable

• The processor's markup. Usually a percentage plus a per-transaction fee. This is the main event.
• Fixed and monthly fees. Statement, gateway, PCI program, PCI non-compliance, terminal rental, per-location account fees. In a multi-location business they multiply by location count.
• Incident fees. Chargebacks, retrievals, address verification.
• Debit routing. Since July 1, 2023, Regulation II requires debit issuers to enable at least two unaffiliated networks, including for online transactions. For exempt debit from smaller issuers, Fed data for 2024 shows an average of 61 cents on dual-message networks against 26 cents on single-message networks. Ask whether your processor routes debit to the lowest-cost network and who keeps the savings.
• Contract terms. Term length, auto-renewal, early termination fees, and the right to receive pass-through reductions.

Interchange-plus versus tiered pricing

On interchange-plus (also called cost-plus), the processor passes interchange and network fees through at cost and adds a disclosed markup. You can see every component and compare one quote with another.

On tiered pricing, the processor groups hundreds of interchange categories into a few buckets, usually "qualified," "mid-qualified" and "non-qualified," and charges a rate for each bucket. The processor decides which transactions land in which bucket. A rewards card, a keyed entry or a late batch can drop a transaction into the expensive tier. You can't see the underlying interchange, so you can't see the markup.

Our view: a multi-location business with meaningful card volume should be on interchange-plus. Flat-rate pricing has a place for very small merchants who value simplicity. Tiered pricing mostly benefits the processor.

How to read a statement

Take one month, ideally your highest-volume month, and do four things.

1. Calculate the effective rate. Total fees divided by total card volume. This is the number to track, not the headline rate in the contract.
2. Split pass-through from markup. On interchange-plus, the statement shows interchange by category, network fees, and processor fees. Add up the processor fees alone, divide by volume, and you have your real markup.
3. Find the downgrades. Look for categories with "non-qualified" or "standard" in the name. Visa's non-qualified consumer credit rate is 3.15% plus 10 cents, more than double the standard retail rate. Downgrades usually point to an operational fix: batch timing, missing data, or keyed transactions.
4. List every fixed fee by location. Multiply by locations and by 12. This is where a chain that grew by acquisition finds three merchant accounts on three price schedules.

If commercial cards are a meaningful share of volume, ask whether your processor sends enhanced (Level II and III) data. Visa's schedule has separate, lower rates for some commercial transactions with enhanced data.

The settlement and what it changes

Visa and Mastercard announced a proposed settlement with merchants in November 2025. Visa's 8-K describes a 10 basis point cut in the average US credit interchange rate for five years, a 125 basis point cap on standard consumer credit, and new rights for merchants to choose whether to accept commercial, premium consumer and standard consumer credit cards. The court granted preliminary approval in June 2026. Final approval is pending and some merchant groups oppose it.

The practical point: the next two years will move interchange in your favor, in debit and possibly in credit. On interchange-plus, you get it automatically. On tiered pricing, the processor gets to decide.

For scale, the Nilson Report put total US merchant processing fees at $187.2 billion in 2024.

What to do this quarter

Pull three months of statements for every merchant account and calculate the effective rate and the processor markup for each. If you are on tiered pricing, request an interchange-plus quote from your current processor and two others using the same volume data. If you want an independent read before you sign, send the statements and contract to Second Opinion for a five-day review, or start with the quick check. For the other per-store lines that compound the same way, see the per-store cost lines nobody owns.

Sources: Visa, Visa USA Interchange Reimbursement Fees (effective October 24, 2026), Federal Reserve, Average Debit Card Interchange Fee by Payment Card Network, Federal Reserve, Board finalizes updates to rule concerning debit card transactions, American Banker, Appeals court confirms Fed set interchange fee too high, Law Commentary, Federal appeals court strikes debit card swipe fee cap, Visa, Form 8-K on proposed merchant settlement, November 10, 2025, Payments Dive, 4 reasons the Visa-Mastercard pact survived, Merchants Payments Coalition, Swipe Fees Totaled $236 Billion in 2024.