The Mastercard interchange fee typically ranges from 1.15% to 3.15% of the transaction value. This is a primary component of the overall costs businesses incur when processing credit card payments.
Understanding Mastercard Interchange Fees
Interchange fees are a transaction fee that a merchant's bank (acquiring bank) pays to the customer's bank (issuing bank) whenever a customer uses their credit or debit card. Mastercard, like other payment networks, sets these rates, but they are not a single, fixed amount. Instead, they vary based on several factors, resulting in the observed range.
Average Credit Card Interchange Fee Ranges
Here's a look at average interchange fee ranges across major payment networks:
| Payment Network | Interchange Fee Range |
|---|---|
| Visa | 1.23% to 3.15% |
| Mastercard | 1.15% to 3.15% |
| Discover | 1.56% to 2.40% |
| American Express | 1.10% to 3.15% |
Source: Average Credit Card Processing Fees and Costs in 2024 | The Motley Fool
What Influences Mastercard Interchange Fees?
While Mastercard sets the general framework, several variables can push a specific transaction's interchange fee higher or lower within the 1.15% to 3.15% range:
- Type of Card: Premium rewards cards (e.g., World Elite Mastercard) often have higher interchange fees than standard consumer cards.
- Transaction Type:
- Card-present vs. Card-not-present: In-person transactions (card-present) where the card is swiped, dipped, or tapped typically have lower fees due to reduced fraud risk. Online (e-commerce) or phone transactions (card-not-present) carry higher fees.
- Industry: Certain high-risk industries may face higher fees.
- Merchant Category Code (MCC): Mastercard categorizes businesses, and some MCCs might have different rates.
- Transaction Volume: High-volume merchants might qualify for slightly lower rates from their processors, though this impacts processing fees more than raw interchange.
- Data Security: Merchants adhering to PCI DSS compliance and using EMV chip readers or tokenization can sometimes qualify for lower rates.
- Processing Method: How the transaction is authorized and settled (e.g., batch processing vs. real-time) can also play a minor role.
How Mastercard Fees Impact Businesses
When a customer pays with a Mastercard, the merchant is responsible for the associated processing fees. These fees are typically deducted from the transaction amount before the funds are deposited into the merchant's account.
For example, if a customer makes a $100 purchase with a Mastercard that carries a 2.0% interchange fee, $2.00 would go to the issuing bank as interchange. This is just one component of the total processing cost for the merchant, which also includes:
- Assessment Fees: A smaller fee paid directly to Mastercard by the acquiring bank, usually a flat percentage (e.g., 0.13% to 0.15%).
- Processor Markup: The fee charged by the payment processor (e.g., Stripe, Square, PayPal, or a traditional merchant account provider) for their services. This can be a percentage, a per-transaction fee, or both.
Therefore, while the Mastercard interchange fee is a significant part of the cost, the total fee paid by a merchant will be higher, encompassing these additional charges. Merchants often receive a blended rate from their processor, making it seem like one overall percentage, but it's composed of these distinct elements.
