Fees, pricing models and 2026 rules
Interchange, network fees and processor markup: how a card fee is built in Canada
The three layers inside every Canadian credit card fee, what drives interchange up or down, and which part of the fee a merchant can actually negotiate.
When a customer pays you by credit card, the fee you are charged is made of three parts. Interchange is paid by your processor to the customer's card-issuing bank and is set by the card network. Network fees (often called assessment or scheme fees) are charged by the card network itself. The processor markup is what your acquirer, processor or reseller keeps. Interchange and network fees are the same whichever processor you use for a given card and transaction; the markup is the only part that competition and negotiation change directly.
This guide explains each layer and what moves it. It belongs to the fees and rules section. All rates are illustrative examples.
Who is involved in a card payment
The FCAC describes a card payment as involving the customer, the merchant, the merchant's payment processing service provider, the card issuer and the payment card network. In a "four-party" network such as Visa or Mastercard, the issuer and the processor are different companies. In a "three-party" network, the network can act as both issuer and acquirer, so the fee structure is set by one company.
Your terminal or website sends the card details to your processor, which routes them through the network to the issuer for approval. At the end of the day, transactions are batched and settled: the issuer sends funds through the network to the processor, which deposits them to you minus fees, or deposits the full amount and bills fees later. Settlement timing is covered in settlement holds, reserves and payouts.
Layer 1: interchange
Interchange is the largest layer for most credit card sales. Networks publish interchange tables with many categories. The rate for a single transaction depends mainly on:
| Factor | Usually lower interchange | Usually higher interchange |
|---|---|---|
| Card product | Standard consumer card | Premium, rewards or business card |
| How the card is used | Inserted or tapped in person | Online, keyed in or over the phone |
| Merchant category | Some categories have special programmes (for example, certain everyday-spend or charity categories) | General categories |
| Merchant size | Eligible small businesses since 19 October 2024 | Larger merchants |
| Card origin | Card issued in Canada | Card issued outside Canada |
You cannot negotiate interchange with your processor, but you can influence your average interchange: encourage tap or chip rather than keying, accept Interac debit, and, if allowed and appropriate, offer a discount for lower-cost payment methods. The Code of Conduct explicitly allows merchants to offer discounts for different payment methods and between card networks; see merchant rights under the Code.
Premium cards deserve a note. The Code requires premium cards to be issued only to a well-defined class of cardholders (by spending, assets or income), to carry clear premium branding, and for application forms to disclose that they may cost merchants more to accept. That is why a customer's premium card can cost you more than a basic card for the same sale.
Layer 2: network fees
Card networks charge their own fees to acquirers, which are generally passed on to merchants. They can include a percentage of volume, per-transaction fees, and fees for specific services such as cross-border transactions. On an interchange-plus statement these appear as separate lines, sometimes with network-specific names. On a flat-rate plan they are hidden inside the single rate.
Under the Code, card networks must give acquirers advance notice of domestic fee changes (longer for structural changes), and acquirers and their downstream participants must give you 30 to 60 calendar days' notice before passing on an increase or a new fee.
Layer 3: processor markup
The markup pays for authorisation, settlement, statements, customer support, risk management and often the sales agent who signed you up. It can be expressed as:
- a percentage on top of interchange (for example, an illustrative 0.20% to 0.40%),
- a per-transaction amount (for example, an illustrative $0.05 to $0.15),
- a monthly subscription fee, or
- a blend hidden inside a flat rate.
Only the markup and fixed fees differ between processors for the same card. That is why interchange-plus quotes are easiest to compare: you compare markups and fixed fees directly.
Worked example: one $80 sale, three cards
All rates below are invented to show the arithmetic.
| Card | Interchange (illustrative) | Network fee (illustrative) | Markup 0.25% + $0.08 | Total fee | Effective rate |
|---|---|---|---|---|---|
| Standard consumer card, tapped | 0.90% = $0.72 | 0.12% = $0.10 | $0.20 + $0.08 | $1.10 | 1.38% |
| Premium rewards card, tapped | 1.70% = $1.36 | 0.12% = $0.10 | $0.20 + $0.08 | $1.74 | 2.18% |
| Business card, keyed online | 2.20% = $1.76 | 0.15% = $0.12 | $0.20 + $0.08 | $2.16 | 2.70% |
The markup is identical in each row; the difference comes from interchange. A flat-rate plan at 2.65% would charge $2.12 on each of these sales: more than the first two, slightly less than the third.
How to read the layers on your statement
The Code requires monthly statements (or access to them) showing your effective merchant discount rate for each card type, the rate and amount of each fee category, including interchange and network fees, and the number and volume of transactions by type. Flat or blended plans may show the per-transaction rate and any fees billed separately instead. Use that data to work out your own costs, step by step, in how to calculate your effective rate.
Quick checks:
- Add interchange and network fees: this is the pass-through cost.
- Add every other fee: this is what your processor charges you.
- Divide the second figure by card volume: this is your effective markup. Compare it with the quote.
FAQ
Can my processor change interchange?
No. Interchange is set by the card networks. Your processor can change its own markup and fees, subject to the notice and exit rights in the Code of Conduct.
Why do online payments cost more?
Card-not-present transactions carry more fraud risk, so networks set higher interchange for them, and processors often add gateway and fraud-screening fees. See online payment gateway fees.
Where can I see official interchange tables?
Visa and Mastercard publish Canadian interchange information on their own websites. Tables are long and change, so check the current version and the effective date rather than relying on a copied figure.
Does a lower interchange always lower my bill?
Only if your pricing passes it through. On interchange-plus pricing it does automatically. On flat or tiered pricing it depends on the processor. See flat rate vs interchange-plus.
Sources
- Financial Consumer Agency of Canada — how card payments work, the Code of Conduct and statement requirements
- FCAC: Accepting card payments — merchant guidance
- Department of Finance Canada — interchange commitments for small businesses
- Visa Canada — current interchange rate information
- Mastercard Canada — current interchange rate information
