How card processing fees work
The rate on a card statement is a bundle. Part goes to the cardholder's issuer, part to the card network and part to your processor, and chargebacks, FX and monthly charges sit on top. Knowing which layer is which is the first step to comparing cards fairly with any other rail.
Key points
- Card costs have three main layers: interchange, network or assessment fees, and processor markup.
- From October 19, 2024, credit card interchange was lowered for eligible small businesses under agreements with Visa and Mastercard.
- Interchange is only one part of what you pay, so a lower interchange rate does not automatically mean a lower statement.
- Fixed per-transaction fees weigh more heavily on small tickets; FX and disputes weigh on cross-border sales.
The three layers of a card fee
When a customer pays by credit card, the money passes through several hands before it reaches your account. Each one takes a share.
| Layer | Who receives it | What drives it |
|---|---|---|
| Interchange | The cardholder's issuing institution | Card type, how the card is used (in-store or online), merchant category and network rules |
| Network or assessment fees | The card network | Network fee schedules, often a small percentage plus per-transaction charges |
| Processor markup | Your processor or acquirer | Your contract: blended rate, an interchange-plus contract, or a flat monthly plan |
| Other charges | Processor and others | Chargeback fees, terminal or gateway fees, statement fees, cross-border and FX fees |
A blended rate wraps all layers into one percentage. Interchange-plus shows interchange and network fees separately, with the processor's markup on top. Neither is automatically cheaper; it depends on your card mix and contract.
The October 19, 2024 small-business reduction
The Department of Finance announced agreements with Visa and Mastercard on May 18, 2023 to lower credit card interchange for eligible small businesses. The changes took effect on October 19, 2024.
Under those agreements, the annual weighted average interchange rate for in-store domestic consumer credit transactions was reduced to 0.95%, and online rates were reduced by 10 basis points. Eligibility is set per network: annual Visa sales volume under $300,000, or Mastercard volume under $175,000. Finance Canada describes reductions of up to 27%.
These figures are as published by Finance Canada and stated here as of October 30, 2026. Agreements and thresholds can change, so check the current terms with your processor.
A lower interchange rate only lowers your bill if your contract passes it through. Processor markup, network fees, equipment and chargeback fees are separate. Compare your statements from before and after October 19, 2024 to see what actually changed.
A worked example: where the money goes
Suppose an online business takes $50,000 a month in card payments averaging $120, with 15% of volume from cardholders outside Canada. Assume a blended rate of 2.6% + $0.30, a 2.5% FX cost on cross-border sales, a 0.5% dispute rate, a $25 fee per dispute and 60% of disputed value lost. These are the site's illustrative defaults, not market data.
| Component | Monthly cost |
|---|---|
| Percentage fees (2.6%) | $1,300.00 |
| Fixed fees ($0.30 × about 417 payments) | $125.00 |
| FX on cross-border volume (2.5% of $7,500) | $187.50 |
| Disputes (fees plus lost revenue) | $202.08 |
| Total | $1,814.58 (3.63% effective) |
How payment size and mix change the rate
The same contract produces different effective rates for different businesses. Three variations on the example above, all using the same illustrative assumptions, show why.
Treat these as sensitivity checks, not forecasts. Your own card mix, contract and dispute history will move the numbers. You can test your figures in the payment cost comparison and see dispute costs on their own in the chargeback exposure calculator.
- No cross-border sales: the same $50,000 at $120 per payment costs about $1,627 a month, or 3.25%, because the FX line disappears.
- Smaller tickets: $10,000 a month in $40 payments, all domestic, costs about $396, or 3.96%. The fixed $0.30 is a bigger share of each sale.
- A 10-basis-point lower rate: if the blended percentage fell from 2.6% to 2.5% (an assumption about pass-through, not a prediction), the original example drops to about $1,765 a month, or 3.53%.
Reading your own statement
Statements vary in format, but the same routine works for most of them.
- Find total card volume and total fees for the month, then divide fees by volume to get your effective rate.
- Separate percentage fees, per-transaction fees and fixed monthly charges.
- Look for cross-border, FX or non-domestic card charges and note what share of volume they apply to.
- List chargeback fees and the value of chargebacks lost.
- If your contract is interchange-plus, check whether interchange on eligible credit transactions changed after October 19, 2024.
- Ask your processor to explain any line you cannot match to your contract.
Comparing cards with other rails
Once you know your real effective rate, comparisons with other rails become meaningful. Interac e-Transfer and EFT tend to replace percentage fees with flat fees; stablecoins replace them with conversion and off-ramp costs; and every non-card rail removes chargebacks along with the customer protection they provide.
For a broader view, read payment rails in Canada and stablecoins vs cards for merchants. If you also handle card data online, PCI DSS vs crypto explains how security obligations differ between the two.
Questions people ask
What is interchange?
Interchange is the fee paid to the cardholder's issuing institution on each card transaction. It is set under network rules and is only one part of what a merchant pays.
Does my business qualify for the lower small-business interchange rates?
Eligibility is set per network: annual Visa sales volume under $300,000 or Mastercard volume under $175,000, per Finance Canada. Confirm with your processor how it applies to your account.
Why is my effective rate higher than my quoted rate?
Fixed per-transaction fees, cross-border and FX charges, monthly fees and chargebacks all add to the quoted percentage. Dividing total fees by total volume shows the effective rate.
Are online card rates the same as in-store rates?
Often not. Card-not-present transactions usually carry different interchange categories, and the 2024 agreements treated in-store and online rates differently.
Sources
- Finance Canada — Government reduces credit card fees for small business owners (2024)
- PCI SSC — PCI DSS v4.0.1
- Financial Consumer Agency of Canada
Reviewed October 30, 2026. Educational information only; not financial, legal, tax or investment advice. This site does not process payments or hold funds.