Interchange, explained without the jargon

Every time a customer taps, dips, or swipes a card, a chain of fees fires off before you ever see the money. The biggest piece of that chain — usually 70–90% of what you pay — is called interchange.

Interchange is the fee paid to the card-issuing bank — the bank that gave your customer their Visa or Mastercard. Visa and Mastercard don't collect it themselves; they just publish the rate tables that everyone else follows. Your processor collects it on the bank's behalf, and it flows straight through to the issuer.

Nobody in the middle — not Trailhead, not your processor — gets to keep it or negotiate it down.

Card type: a basic debit card costs far less to accept than a rewards or 'signature' credit card. Airline and cashback cards are usually the most expensive category.

How the card is entered: a chip tap or dip qualifies for a lower rate than a manually keyed number. Card-not-present (phone, online) transactions cost more, because fraud risk is higher.

Merchant category: restaurants, supermarkets, and e-commerce each have their own published categories with different rates, because networks price risk and cost differently by industry.

Debit regulation: debit cards from very large banks (over $10 billion in assets) are capped by federal law at roughly 0.05% + 21¢. Debit from a smaller community bank isn't capped, and can cost 5–10x more per transaction.

That's why a '2.9% flat rate' almost never matches what you'd pay on interchange-plus — flat-rate pricing has to average across all of that variation, which means it overcharges low-risk transactions to cover the expensive ones.

You can't negotiate interchange — it's set by the card networks, not your processor. What you can control is which pricing model you're on, how much markup your processor adds on top of interchange, and whether your transactions are qualifying for the lowest interchange tier they're eligible for — this is where most of the real money leaks.

A statement review is really just this: pulling apart your blended rate to see how much is interchange (fixed, not negotiable) versus markup (negotiable, and often padded).