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What are interchange fees and how do they work?
Interchange fees are fixed, non-negotiable charges paid by the merchant’s bank, known as the acquirer, to the customer’s bank, known as the issuer, every time a card payment takes place.
To explain what is interchange, each card transaction includes three cost components. The interchange fee goes to the issuing bank. The card scheme fee goes to Visa or Mastercard. The acquirer then adds its margin. Clover operates within this structure as the payment technology provider, not the fee setter.
When merchants ask what is an interchange fee or what is interchange fee, the answer remains consistent. These fees cover fraud prevention, interest-free credit periods and the infrastructure required to process payments securely.
The interchange rate changes depending on card type, transaction method and origin. A UK debit card tap on Clover Flex carries a lower interchange rate than an international corporate card processed through Clover Station Duo. This variation explains why interchange fees explained clearly matter for financial planning.
Understanding interchange fee caps in the UK market
UK regulations cap interchange fees on domestic consumer cards. Debit cards are capped at 0.2 percent and credit cards at 0.3 percent. These limits apply to cards issued within the UK, clarifying what are interchange fees for everyday retail, hospitality and services transactions. The caps reduce excessive costs but do not represent the total processing fee. Scheme fees and acquirer charges sit above the interchange fee.
Unregulated cards fall outside these caps. Corporate business cards and international cards, including those issued in the USA, carry a higher interchange rate. These cards can affect margins in sectors such as pubs and restaurants.
Government guidance1 confirms this layered structure of interchange fees and additional processing charges. Industry research shows card payments dominate UK restaurant transactions, increasing the relevance of interchange fees.2
Gaining financial clarity through Clover’s transaction data
Why visibility matters when asking what are interchange fees? Clover point-of-sale systems provide digital records of every transaction, including card type and payment method. This removes uncertainty around interchange fees.
According to recent UK Finance data3, card payments continue to replace cash across UK sectors, reinforcing the importance of accurate transaction data for cost control. Through the Fiserv network, Clover delivers consolidated reporting without manual reconciliation. Businesses using Clover Mini in retail or Clover Flex for mobile payments access consistent transaction data, using historical reports to identify trends. Seasonal increases in international cards or corporate payments become visible, which allows merchants to anticipate when higher interchange fees affect profitability.
Choosing between blended and interchange plus pricing models
How pricing models shape interchange fees? Explained in practice: Blended pricing applies a single rate to all transactions. Interchange plus pricing separates the interchange fee and adds a fixed acquirer margin.
When asking what is interchange within pricing models, interchange plus reflects the true interchange rate for each card. This approach often suits higher-volume businesses. Blended pricing offers simplicity for smaller merchants.
Clover’s support teams help businesses select the appropriate model based on transaction volume and sector. Regardless of pricing model, Clover POS systems optimise technical processing. Each tap or dip routes efficiently, reducing avoidable costs and supporting secure transactions across Clover Mini, Clover Flex and Clover Station Duo.
Conclusion: Achieving financial clarity with Clover
Understanding what are interchange fees removes confusion around card payments. These fees remain a fundamental part of a secure payment ecosystem. By choosing a partner such as Clover, business owners gain tools and transparency that turn interchange fees into a manageable business cost. Clear reporting supports informed decisions and sustainable growth. Contact us today to learn more about managing interchange fees.
Bibliorgraphy
1 GOV.UK: Interchange fee regulation: a consultation
2 UKHospitality Christie & Co: Benchmarking Report 2022
3 UK Finance: UK Payment Markets 2025
