Interchange Fees: The Cost of Getting Paid (and Why Businesses Hate It)

Feb 5

2 min read

"The cost of a thing is the amount of life which is required to be exchanged for it, immediately or in the long run."— Henry David Thoreau

If there’s one fee that drives business owners crazy, it’s interchange—the percentage of every credit or debit card transaction that gets siphoned off before they even see their revenue. It feels like a tax on making money, imposed by banks and credit card networks, with no way around it.

But while interchange fees are frustrating, they also enable the digital economy we all rely on. The ability to get paid instantly, accept cards online, and avoid cash-related risks all comes at a cost—one that businesses have no choice but to pay.

Why Businesses Hate Interchange Fees

For every $1,000 in sales, a business might pay $20 to $30 in interchange fees—a frustrating expense, especially for industries with thin profit margins. But what makes it even worse?

It’s non-negotiable for small businesses – While large corporations can negotiate lower rates, small businesses pay full price, making them less competitive.
It’s inconsistent – A transaction on a high-end rewards card costs more than a standard debit card.
Online businesses get hit harder – Card-not-present transactions (like e-commerce) have even higher fees due to fraud risk.

For many small businesses, interchange fees feel like a system designed to benefit banks and large corporations at their expense.

Small Businesses Pay More, Big Businesses Pay Less

The biggest frustration for small business owners? They pay more than their larger competitors.

Big retailers like Walmart, Amazon, and Target negotiate interchange fees down, but a small shop on Main Street has no such leverage. That means for the same $100 purchase, a large chain might lose 1.5% to interchange, while a small business loses 2.9%. That difference compounds over thousands of transactions, tilting the playing field.

Adding insult to injury, the rewards customers earn from credit cards come from these very fees—meaning small businesses are effectively subsidizing perks for their wealthiest customers. A luxury credit card with premium cashback or travel rewards? The interchange fee on that transaction is even higher. The richer the customer, the more they take, and the more the business pays.

But What’s the Alternative?

For all its problems, avoiding interchange means avoiding digital payments altogether—which comes with its own headaches:✔️ Cash Handling Costs – Counting, securing, and depositing cash eats time and money.✔️ Theft & Shrinkage – Cash-heavy businesses are prime targets for both robbery and internal theft.✔️ Limited Online Sales – No interchange means no e-commerce.✔️ Fewer Customer Transactions – Customers expect digital payments, and card users tend to spend more than cash customers.

Will Interchange Fees Survive?

For now, interchange is an unavoidable cost of doing business—but technology is evolving. The rise of fintech, crypto, and real-time payment networks could disrupt the way transactions happen. If a cheaper alternative emerges, businesses will flock to it.

Visa and Mastercard dominate today, but will they forever? Big tech and new players see the massive profit in the interchange system—and they want in. The next decade could bring major changes.