Card fees explained: interchange and who gets it
What interchange is, who ends up with it, why some card payments cost more than others, and how to record card fees from payouts and settlements.
By Achekam · · 5 min read · For Running a business businesses in South Africa, Nigeria, Kenya
You sell something for a round amount, the customer taps a card, and a day or two later a smaller amount lands in your bank account. The missing slice is the cost of accepting the card, and most owners only ever see it as a single deduction. Yet that deduction is built from several parts, and the largest of them usually goes to a bank you have never dealt with: the one that issued your customer's card.
That part is called interchange. Understanding it will not make it disappear, but it explains why one card payment costs you more than another, and it shapes how you should record card income in your books.
What interchange is
Investopedia defines an interchange fee as a fee a merchant pays when a customer pays by credit or debit card. It is set by the card payment networks, such as Mastercard and Visa, and it is usually calculated as a percentage of the transaction plus a fixed fee.
Two things in that definition matter for a business owner. First, you do not negotiate interchange directly; the networks set it. Second, because it has a percentage element and a fixed element, small payments can be proportionally more expensive than large ones, since the fixed part is the same whatever the amount.
Investopedia's explanation is written from a largely American point of view, and the figures it discusses are American ones. The structure is what carries over. For the actual rates on your account in South Africa, Nigeria or Kenya, the source is your own bank's or payment provider's fee schedule.
Where the money goes
Investopedia explains the flow like this: the merchant's acquiring bank, meaning the bank or provider that settles card payments to you, passes the fee to the card network, and most of it lands with the card issuer while a small percentage goes back to the network.
| Party | What it does | What it receives |
|---|---|---|
| Your customer | Pays with their card | Nothing from the fee |
| Card issuer (customer's bank) | Issued the card and carries the cardholder risk | Most of the interchange |
| Card network (Visa, Mastercard) | Runs the network and sets interchange | A small share |
| Acquirer or gateway | Settles the payment to you | Its own charges, on top of what it passes on |
| You | Accept the card | The sale amount less all fees |
Your statement may show one combined deduction or several lines. Either way, interchange is one ingredient inside it.
Why some card payments cost more
Investopedia lists the factors that affect interchange: the type of card (debit or credit), the payment method (such as chip, PIN or tap-and-pay), the type of transaction (online or in person) and the merchant's industry. Two of these explain most of the variation an ordinary business sees.
Credit against debit
Investopedia states that credit cards generally carry higher interchange than debit cards, and that higher-end cash-back and travel rewards cards charge high fees. When a customer pays with a premium rewards card, part of what funds their rewards comes out of your fee.
Online against in person
Investopedia notes that an online interchange fee might be higher than an in-person one, because internet transactions are deemed to carry more security risk. The same customer paying the same invoice may cost you more through a pay link than through a terminal at your counter.
None of this means you should turn customers away. It means your card costs will move with your sales mix, and a month with more online or premium-card sales may show higher fees without anything going wrong.
Seeing the fees in what you are paid
The fee rarely arrives as a separate invoice. It shows up as the gap between what customers paid and what was settled to you. For a business, that gap appears in two places:
- Card terminal settlements. The bank's terminal settles a batch of card sales into your account, usually net of its charges, and the bank statement or merchant statement shows the deduction.
- Gateway payouts. An online gateway collects many payments and pays out a total after its fees, with a payout report that lists what was deducted.
The common mistake is to record only the net amount as sales. That understates revenue and hides the cost of accepting cards, which is a real expense you want to see every month.
Recording card fees in Achekam
Achekam separates the sale from the settlement, which is what makes the fee visible.
At the till, a card payment is recorded by the cashier from the bank terminal's slip, because the till is not connected to any card machine. Every till sale that reaches the server posts a balanced journal in the same step, with each payment method to its own account; card and QR payments go to account 1060. Revenue is recorded at the full sale amount.
When the terminal settlement reaches your bank, you import the statement (as PDF, CSV, Excel, OFX, QIF, MT940 or CAMT.053), and bank lines are matched by suggestion, with a person accepting each match. A fee line not yet in the books becomes a suggested journal that a person approves, so the bank charge lands in an expense account rather than being netted against sales.
For online gateways, payouts from each gateway, including M-Pesa, are recorded against that gateway's clearing account with its fees, either by hand or from Paystack's and Flutterwave's own payout lists. The clearing account then shows the gross payments in, the fees out and the payout to the bank, and should come back to nothing once a payout is fully recorded.
For worked examples by industry, see reconciling card settlements in retail and gateway payouts and fees for travel businesses.
What to do with this
Investopedia's article on what interchange fees are and who receives them explains the mechanics in more depth. Then ask your bank or gateway for its current fee schedule, compare it with what your last three months of settlements actually show, and keep card fees in their own expense account so the cost of taking cards is visible on every set of management accounts.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
