If you use your card to pay for goods or services, you might have noticed that the final amount doesn't match up to what you were expecting. That's often because businesses will add on fees and surcharges to cover their own costs, like the cost of accepting card payments.
One of these charges is interchange fees. They make up the bulk of the extra charge you end up paying.
Here we take a look at what these fees are, when you're charged them, and how you can avoid them.
When is an interchange fee charged?
Interchange fees are the cost businesses have to pay when a customer uses their credit or debit card. These fees cover the banks' costs of moving the money from the customer's bank account to the business' bank account.
This is just one of the reasons you will see a surcharge added to your final due payment.
How are interchange fees calculated?
Card issuers like Visa, Mastercard and American Express, set interchange fees. Each issuer has different fees for various transaction types. The fees are usually calculated through a flat rate and/or a percentage of the total cost.
For example, if you use a Visa debit card for a contactless payment of $15 or less, the interchange fee will be 5.5 cents. If the sales total is more than $15, it will be 0.22% of the total cost.
For a Mastercard debit card, you're looking at 0.044 cents for a transaction of $15 or less, or 0.11 cents for more than $15.
How much will an interchange fee cost me?
Whether or not you will see the cost of an interchange fee depends on where you shop: some of the larger stores (like big supermarkets) may not pass on the interchange fee with a surcharge.
For places where you will be charged interchange fees, it depends on the type of transaction, the card you're using, and how much you've spent.
Debit versus credit cards
For a standard card payment on a Visa debit card, you're probably looking at an interchange fee rate of 0.22%. If you spend $100, that's a 22 cent surcharge. For Visa credit cards, the rates get a little bit more complex. You might be charged a rate of 0.237% when you pay for a taxi, but there's a higher rate of 0.275% at a supermarket.
With Mastercard, a standard transaction with a credit card will have a fee of 0.231%, a fee of 0.33% if you use contactless in a taxi, and 0.34% for contactless payments. Debit cards using Mastercard tend to use dollar rates: 0.66 cents for taxis, 0.44 cents for standard card transactions and 11 cents for online transactions.
Types of cards
The more premium your card is, the higher the interchange fee. For example, for a standard Visa credit card there's a fee of 0.231% per transaction; for a premium Visa credit card (like Visa Platinum), the interchange fee jumps up to 0.792%.
Mastercard charges 0.44 cents for a standard card, but 11 cents for a premium card.
Types of transactions
As mentioned above, the fees for credit cards can vary depending on what type of merchant is taking payment.
Card issuers also have types of merchants/businesses who get better rates. This can be based on the volume of transactions, growth thresholds and innovation requirements. Rates here can range from 1 cent to 11 cents.
Note: The below is for credit cards, and is correct as of March 2022.
Interchange category (Places)
Visa
Mastercard
Government, Utilities & Insurance
0.231%
0.275%
Transit
0.231%
0.33%
Service station/petroleum
0.275%
0.44%
Interchange category (Card type)
Visa
Mastercard
Standard cards
0.231%
From 0.231%
Premium cards
0.792%
0.33% - 0.88%
Super premium cards
0.770% - 0.858%
0.715% - 0.88%
Tips to avoid interchange fees
Use cash. Interchange fees only relate to card payments, so using cash is a sure way to not pay them. However, more and more merchants are turning away from accepting cash, particularly in light of the COVID-19 pandemic. Check specific retailers to see whether they accept cash payments.
Use larger stores. Big supermarkets and chain stores are less likely to pass on fees and charges, as they know their profits can cover the costs.
Research the type of store. Some stores have partnerships with Visa and/or Mastercard and benefit from lower interchange fees. You might not be able to avoid fees altogether, but you can possibly reduce them.
Check your card type. Credit cards typically have higher interchange fees, so paying with your debit card may save you a few cents. Additionally, more premium cards will charge higher rates.
Consider switching card issuer. While Visa and Mastercard both have interchange fees, American Express does not. However, you may end up paying more in other fees and some stores prefer not to accept American Express cards.
Finder survey: How often are Australians of different ages charged extra for paying by card?
Response
75+ yrs
65-74 yrs
55-64 yrs
45-54 yrs
35-44 yrs
25-34 yrs
18-24 yrs
Less often
53.57%
34.76%
35%
26.32%
18.13%
23.33%
10.99%
2-3 times a month
16.07%
14.63%
11.88%
12.87%
17.58%
16.11%
21.98%
Not sure
14.29%
20.73%
28.75%
27.49%
23.08%
20.56%
32.97%
At least once a week
8.93%
17.68%
16.25%
19.88%
20.33%
25%
23.08%
Once a month
7.14%
6.71%
5%
8.77%
10.99%
10.56%
8.79%
Daily
5.49%
3.13%
4.68%
9.89%
4.44%
2.2%
Source: Finder survey by Pure Profile of 1004 Australians, December 2023
Rebecca Pike is Finder's senior writer for money. She joined Finder after almost four years writing for business publications in the mortgage and finance industry, including three years as editor of Mortgage Professional Australia. She regularly appears as a money expert on programs like Sunrise and Today, as well as across radio and newspapers. She also holds ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products.
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very few merchants, (if any to my knowledge) charge varied fees according to the category of card used. If they don’t how do they legally work out what fee to charge without the risk of being accused of price gouging or excessive fees?
There are regulations in place by the Reserve Bank of Australia – this means retailers can only charge customers for the ‘reasonable cost’ of accepting electronic payment.
For more information about credit card surcharges, please read and get more information about how much are the credit card surcharges, how to avoid these surcharges and some frequently asked questions.
I don’t think that was the point that Michael was making: the article above suggests that merchants charge higher fees to customers with platinum cards than they do to customers with basic cards:
“This means that the upgrade in card, regardless of whether you asked for that card in the first place, is costing you more for every swipe.”
That’s simply not the case. I’ve never encountered a merchant anywhere in Australia who charges a different fee if you have a platinum card versus a standard credit card.
Although it is quite common for them to charge a higher fee for AMEX/Diners versus Mastercard/Visa.
So the reality is the reverse of what this article suggests: everyone’s paying more to fund these higher interchange fees, because it’s either factored into the price of the goods, meaning you’re subsidising platinum cards even if you pay cash, or — if there is a credit card surcharge applied to the customer — then the effect of the higher fees for platinum cards is averaged out amongst all credit card users who choose to pay the surcharge, even those with basic cards.
As a customer, I can’t see a reason why I wouldn’t take the platinum card.
Oh on the subject of: “this mean retailers can only charge customers for the ‘reasonable cost’ of accepting electronic payment.”
I see no evidence of this being enforced whatsoever. A 3% surcharge on AMEX transactions still seems to be pretty common in my experience, despite this being nowhere near the ‘reasonable cost’ of accepting that card.
While the interchange fees outlined in this article are charged by lenders, it’s up to individual retailers to pass on these additional charges. As you mentioned, this doesn’t always happen, as retailers may only have a surcharge in place for AMEX cards, etc.
There has also been a lot of talk around the ‘reasonable cost’ that retailers must cover, especially when it comes to things like airline fees and the high credit card surcharges consumers pay. This may change in the near future, but for now, the ‘reasonable cost’ wording is all we have to go by.
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very few merchants, (if any to my knowledge) charge varied fees according to the category of card used. If they don’t how do they legally work out what fee to charge without the risk of being accused of price gouging or excessive fees?
Hi Michael,
Thanks for your question.
There are regulations in place by the Reserve Bank of Australia – this means retailers can only charge customers for the ‘reasonable cost’ of accepting electronic payment.
For more information about credit card surcharges, please read and get more information about how much are the credit card surcharges, how to avoid these surcharges and some frequently asked questions.
Cheers,
Shirley
I don’t think that was the point that Michael was making: the article above suggests that merchants charge higher fees to customers with platinum cards than they do to customers with basic cards:
“This means that the upgrade in card, regardless of whether you asked for that card in the first place, is costing you more for every swipe.”
That’s simply not the case. I’ve never encountered a merchant anywhere in Australia who charges a different fee if you have a platinum card versus a standard credit card.
Although it is quite common for them to charge a higher fee for AMEX/Diners versus Mastercard/Visa.
So the reality is the reverse of what this article suggests: everyone’s paying more to fund these higher interchange fees, because it’s either factored into the price of the goods, meaning you’re subsidising platinum cards even if you pay cash, or — if there is a credit card surcharge applied to the customer — then the effect of the higher fees for platinum cards is averaged out amongst all credit card users who choose to pay the surcharge, even those with basic cards.
As a customer, I can’t see a reason why I wouldn’t take the platinum card.
Oh on the subject of: “this mean retailers can only charge customers for the ‘reasonable cost’ of accepting electronic payment.”
I see no evidence of this being enforced whatsoever. A 3% surcharge on AMEX transactions still seems to be pretty common in my experience, despite this being nowhere near the ‘reasonable cost’ of accepting that card.
Hi Matt,
Thanks for your comment.
While the interchange fees outlined in this article are charged by lenders, it’s up to individual retailers to pass on these additional charges. As you mentioned, this doesn’t always happen, as retailers may only have a surcharge in place for AMEX cards, etc.
There has also been a lot of talk around the ‘reasonable cost’ that retailers must cover, especially when it comes to things like airline fees and the high credit card surcharges consumers pay. This may change in the near future, but for now, the ‘reasonable cost’ wording is all we have to go by.
Thanks,
Elizabeth