Most owners I sit down with have never heard the word interchange. They've been processing cards for ten years. They know they pay too much. They've never been told where the money actually goes.
That's not an accident. Big processors don't explain interchange because the second you understand it, you start asking why your "simple 2.65% rate" looks nothing like the real cost. So let's pull the curtain back.
The one-sentence version
Interchange is a fee paid by your processor to the bank that issued your customer's card, every time you run a credit or debit transaction. It's set by Visa and Mastercard. Your processor doesn't keep it. You'd pay it under any processor on earth.
That last sentence is the whole point of this post. If you remember nothing else, remember that. Interchange is wholesale. Everything else is markup. And the gap between the two is where you're getting squeezed.
Where the fee actually goes
When a customer taps a Visa Infinite for a $1,000 transmission job, the money doesn't just teleport into your bank account minus a "fee." A bunch of parties get a cut along the way. Here's roughly how it breaks down on that $1,000 charge:
Who gets what on a $1,000 Visa Infinite transaction
Three parties take a cut before the money lands in your account. The biggest one — by a long shot — is the bank that issued the card. That's interchange. It's roughly 1.3% to 2.1% on a typical credit transaction, and it doesn't go anywhere near your processor.
The second biggest is the network fee — Visa and Mastercard each take a small assessment on every swipe. Your processor has no say in that either.
The third cut is your processor's markup. That's the only part anyone competes on. And it's the only part you can actually shop.
Why no two cards cost the same
Here's where it gets uncomfortable for flat-rate processors. Every card type has a different interchange rate. A basic debit card is dirt cheap to process. A premium rewards card is expensive. A corporate purchasing card is even more so.
The reason is simple: that interchange fee is what funds the rewards. When a customer earns 2% cashback on a premium Visa, the bank has to find that money somewhere. They find it by charging you a higher interchange fee every time that card gets tapped. The reward isn't free. It's paid for by the merchant.
Here's a rough breakdown of Canadian interchange rates as of 2026:
| Card type | Typical interchange | Real-world examples |
|---|---|---|
| Interac debit (chip + PIN, in person) | ~$0.025 - $0.04 flat | Standard chequing debit |
| Visa Debit / Debit Mastercard | 0.40% - 0.70% | Online debit, prepaid cards |
| Standard consumer credit | 1.30% - 1.50% | No-fee Visa, basic Mastercard |
| Rewards credit | 1.65% - 1.85% | Cashback cards, basic points cards |
| Premium / Infinite credit | 1.85% - 2.10% | Visa Infinite, World Elite Mastercard |
| Corporate / Purchasing | 2.00% - 2.30% | Business cards, corporate AmEx |
Same store. Same till. Same swipe motion. The card the customer hands you can change the cost to your business by 5x. That's not a guess — that's the gap between Interac debit and a corporate Visa.
Interac debit is the cheapest card you'll ever process
If your customer base skews older, blue-collar, or rural, you probably run more debit than the average shop. That's a hidden advantage you're not getting credit for on a flat-rate plan. Under a flat 2.65%, you pay the same on a $4 chip-and-PIN debit as on a corporate Visa. Under Interchange Plus, your debit transactions cost pennies.
How processors hide it from you
This is the part that quietly costs Canadian small businesses millions a year. There are three common pricing models, and only one of them actually shows you interchange.
1. Flat rate (Square, Stripe, most newer processors)
You pay one rate on every transaction. Square charges 2.65% in-person. Stripe charges 2.7% + $0.30 online. Doesn't matter if the card was a basic debit or a corporate purchasing card — same rate. Same rate to you.
Looks simple. Feels fair. It's neither. On a basic debit transaction where the real cost is 0.5%, the flat-rate processor pockets the other 2.15%. On a premium rewards card where the cost is 2%, they only make 0.65%. They count on the mix balancing out — and the mix in Canada heavily favours the processor. Most consumer transactions cost the processor less than the flat rate they're charging you.
2. Tiered pricing (the legacy bank model)
This is the model the big banks have been quietly running for two decades. You get charged a different rate based on what tier the card falls into — "qualified," "mid-qualified," "non-qualified." The tiers are defined by the processor, not by Visa or Mastercard. Which means they can quietly move cards from "qualified" (cheap) to "non-qualified" (expensive) and you'll never know.
If your statement has tier-based pricing on it, you're almost certainly overpaying. Tiered pricing was built to hide markup. Here's how to read your statement →
3. Interchange Plus (IC+)
The transparent option. You pay the actual interchange — whatever Visa or Mastercard charged that day — plus a fixed, disclosed markup. Dough's IC+ rate is interchange plus 0.20%, with $0.04 per debit transaction. You see the wholesale. You see the markup. You see the total.
For most established businesses doing $20K a month or more in card volume, IC+ is the cheapest model that doesn't involve the customer paying a surcharge. Full IC+ deep dive here →
The two myths I hear every week
Myth 1: "My rate is just 2.65%, simple"
If you're on Square or Stripe, your real cost isn't 2.65% — your real cost is the interchange portion of that rate, plus whatever Square is keeping on top. The 2.65% is the total. The interchange piece is invisible to you because Square never breaks it out. They don't have to. You agreed to a flat rate.
The problem: as your card mix shifts toward debit and basic consumer credit (which is most of what most small businesses run), Square's margin on your business goes up — not down. The "simple" rate is simple for one party. Not you.
Myth 2: "Switching processors will lower my interchange"
No it won't. Interchange is set by Visa and Mastercard. Every processor in Canada pays the same interchange to the issuing banks. Switching processors lowers your markup — the part above interchange. Anyone who tells you they can negotiate a lower interchange rate is either confused or lying.
The real question isn't "can I get cheaper interchange." It's "how much markup is my current processor taking on top of interchange, and can I see it?" If you can't see it, you're almost certainly overpaying.
One more thing: debit is different
Interac debit in Canada doesn't work like credit interchange. Instead of a percentage, you pay a small flat fee per transaction — typically $0.025 to $0.04. That's it. No percentage. No premium tier. No rewards funding to cover.
This is huge for high-volume, low-ticket businesses (corner stores, cafés, anywhere with lots of small debit taps). On a $4 coffee, a flat-rate processor takes ~11 cents. Under proper debit pricing, you pay 4 cents. Multiply by 8,000 transactions a month and the gap is real money.
This is also why Dough — and most transparent processors — charge $0.04 per debit transaction separately, no matter which pricing model you're on. We're passing through the actual cost. See all three Dough pricing models →
How to figure out what you're really paying
The fastest way to know if you're getting taken: divide your last month's total processing fees by your total card volume. That's your effective rate. Then compare it to where it should be.
Total fees ÷ total card volume = effective rate
Example: $1,500 in monthly fees on $50,000 in card volume = 3% effective rate. That's high. Most Canadian small businesses should be in the 2.0% to 2.4% range on a properly priced plan. Anything over 2.7% means you're leaving real money on the table — usually $300 to $800+ a month.
Send us that effective rate, and a sample statement, and we'll tell you within an hour what the gap is between your current cost and what you'd pay on IC+ or surcharging. Free, no commitment, no pitch deck.
The TL;DR
- Interchange is the wholesale cost of running a credit card. It's set by Visa and Mastercard, paid to the issuing bank, and you'd pay it on any processor.
- Premium rewards cards cost more to process than basic debit or no-fee credit. The reward points are funded by your interchange fee.
- Flat-rate processors pocket the spread. On low-cost transactions (debit, basic consumer credit), Square and Stripe make a big margin. That's most Canadian small business volume.
- Switching can't lower your interchange — every processor pays the same. But it can dramatically lower the markup on top.
- Interchange Plus is the transparent model. You see the actual cost. You see the markup. Nothing is hidden in a "qualified" tier.
- If your effective rate is over 2.7%, you're overpaying. Probably by $300 to $800 a month or more.
Zachary at Dough
Founder of Dough Payments. Based in Hamilton, Ontario. Spent the last several years pulling apart Canadian merchant statements and figuring out where the markups hide. Dough is what came out of that — a processor that lowers your fees and reinvests the savings back into your business through the Boost program.