Interchange Fee
What interchange is
Interchange is the wholesale cost of accepting a card payment. It is set by Visa and Mastercard (the card networks) — not by your bank, not by your POS vendor, and not by your payment processor. Nobody in the payments chain has any control over the interchange rate. It applies every time a card is swiped, tapped, or keyed.
What interchange is not
Interchange is not your processing rate. Your processing rate is the total fee you pay, which includes:
- Interchange (~1.65% of a typical UK consumer Visa debit transaction)
- Assessment (~0.13% — the card network’s own cut)
- Acquirer markup (~0.85% — your processor’s margin)
When Square quotes you 1.75% in the UK, the breakdown is approximately: 1.65% interchange + 0.13% assessment + -0.03% (Square rounds to flat). When Toast quotes 2.49%, the extra 0.74 percentage points over interchange-plus-assessment is the acquirer markup and processor margin.
Why this matters for your POS choice
The acquirer markup is the only component anyone can negotiate. At card volumes above £15,000/month, most UK acquirers will quote below their rack rate — but only if you ask. No POS reseller tells you this because their margin depends on you not asking.
The practical implication:
- If you accept a flat-rate POS (Square 1.75%, Toast 2.49%), you are paying a fixed markup over interchange regardless of your actual transaction mix
- If you use interchange-plus pricing through an acquirer that supports it (available through Lightspeed’s open payment API, for example), your rate reflects actual interchange costs — which for premium credit cards is higher, but for debit cards is significantly lower
At £20,000/mo card volume, a 0.5-point processing rate difference costs £1,200/yr. That is more than the annual software subscription for most POS tiers. Understanding interchange is how you know whether you are paying a fair price.
Related pages
- Interchange-plus pricing explained — how the transparent pricing model works
- How to negotiate processing rates at £15K+/mo — the step the site exists to tell you about
- POS pricing decoded — software vs hardware vs processing in full