If you have compared card payment quotes, you have probably seen two very different styles: a simple rate like "1.2% per transaction", or a quote that says "interchange plus plus" with a small margin on top. They are different ways of charging for the same thing. This guide explains both, the regulated fees underneath them, and which tends to suit a small business.

Key points

  • Every card payment carries interchange fees and scheme fees, plus the provider's own charge. Pricing models differ in how openly those parts are passed on.
  • UK consumer debit interchange is capped at 0.2% and consumer credit at 0.3%. Commercial cards and three-party schemes such as American Express are outside the caps.
  • Online payments from EEA-issued cards at UK businesses carry much higher interchange since Brexit. The PSR plans to cap them, but the level and date are not yet set.
  • Most small businesses are on blended pricing. Interchange++ gives more transparency but less predictable bills.

What sits underneath every card payment

The Payment Systems Regulator (PSR) describes the merchant service charge you pay as made up of three parts: interchange fees, scheme fees and the acquirer's net revenue (its costs and margin) (PSR card-acquiring final report, para 3.18).

  • Interchange fee: paid by your provider to the customer's card issuer.
  • Scheme fees: paid to the card scheme, such as Visa or Mastercard, for its services and processing.
  • Provider margin: what your acquirer or payment provider keeps to cover its costs and profit.

Interchange and some scheme fees vary depending on the card type, the scheme, where the parties are located, whether the payment was online or face to face, and how the cardholder was authenticated (para 3.19).

The two pricing models

Blended (standard) pricing. The provider charges one or more "headline rates" that do not automatically pass through interchange at cost (para 3.63). You might pay one rate for all debit cards and another for credit cards, plus additional fees for certain events or transaction types (paras 3.64 to 3.66). The provider sets its rates so that, across your mix of transactions, it covers the interchange and scheme fees and makes its margin (para 3.67).

Interchange plus plus (IC++). The interchange fee and scheme fees on each transaction are passed through at cost, and the provider adds its own processing fee (para 3.63). There is also IC+, where only interchange is passed through at cost and the provider's fee covers scheme fees as well.

The UK interchange caps

After Brexit, the EU Interchange Fee Regulation was kept in UK law and amended to work on a UK-only basis by The Interchange Fee (Amendment) (EU Exit) Regulations 2019. As it now applies in the UK:

  • interchange on a UK consumer debit card transaction is capped at 0.2% of the transaction value, with an alternative option of a fixed per-transaction fee within limits (Article 3)
  • interchange on a UK consumer credit card transaction is capped at 0.3% (Article 4)
  • the caps do not apply to commercial cards or to cards issued by three-party schemes, such as American Express (Article 1(3))

These caps apply to interchange only. They do not cap scheme fees or your provider's margin.

Cross-border fees and the UK-EEA cap

When the UK left the EU, the caps stopped applying to payments between the UK and the EEA. The PSR found that Mastercard and Visa then raised interchange on online (card-not-present) payments made with EEA-issued consumer cards at UK businesses fivefold, from 0.2% to 1.15% for debit and from 0.3% to 1.5% for credit (PSR cross-border interchange project page). In its December 2024 final report, it estimated the increases were costing UK users of these card payment services around £150 million to £200 million a year, and concluded that a price cap was the only effective remedy (PSR MR22/2.7, paras 1.13 to 1.14).

Since then:

  • In October 2025, the PSR decided not to proceed with an interim cap, citing ongoing litigation, and to focus on a robust methodology for a longer-term cap (PSR project page).
  • On 15 January 2026, the High Court upheld the PSR's power to cap these fees (PSR announcement).

As at 1 October 2026, we have not found a published decision on the level of the cap or when it will start. If you sell online to customers in Europe, this is one to watch.

Scheme and processing fees

Scheme fees are not capped. In March 2025, the PSR concluded that Mastercard and Visa had increased their core scheme and processing fees to acquirers by at least 25% since 2017, costing businesses at least £170 million extra a year (PSR MR22/1.10). In July 2026, it gave the two schemes directions requiring clearer fee information for acquirers, which they can pass on to merchants, by July 2027, and better governance of pricing decisions from November 2026 (PSR PS26/1). These measures are about transparency; they do not set a price limit.

Who is on which model

The PSR found that around 98% of small and medium-sized businesses are on standard (blended) pricing (para 4.55), and that most acquirers told it IC+ and IC++ were only available to, or suitable for, large merchants. Around 35% of large merchants had IC+ or IC++, typically the largest with annual card turnover above £50 million (para 4.50).

One finding is worth knowing. When the interchange caps came in, merchants on IC++ received the full benefit automatically, but the PSR found that small and medium-sized merchants on standard pricing, on average, got little or no pass-through of the savings (final report, summary). With blended pricing, a fall in underlying costs only reaches you if your provider lowers your rate, or you negotiate or switch.

Pros and cons for a small business

Blended pricing

  • Pros: simple to understand and budget for; your rate does not move with each card type; easy to compare headline rates.
  • Cons: you cannot see how much is interchange and how much is margin; changes in underlying costs are not passed on automatically; extra fees can sit outside the headline rate.

Interchange++

  • Pros: you see each part of the cost; changes in interchange and scheme fees flow through automatically, in both directions; the provider's margin is clear and easier to compare.
  • Cons: statements are longer and harder to reconcile; your effective rate moves with your card mix; the PSR found acquirers mostly offer it to large merchants, and IC++ merchants typically still pay additional event-based fees such as authorisation and chargeback fees (para 4.52).

For most small businesses, the practical question is not which model is better in theory, but which quote gives the lowest total cost for your actual mix of cards. That is what your effective rate measures: total card charges divided by total card turnover. Our guide to reading your card machine statement shows how to calculate it.

See how your current pricing compares

If you are not sure what model you are on, or whether it is good value, you can upload a recent statement for a free comparison. A UK advisor at The Rate Dropper will work out your effective rate and show what the same volume would cost with Worldpay, Dojo, SumUp, Zettle, takepayments, Barclaycard, Elavon and Square. It is free for businesses; we are paid a commission by the provider you choose.