Merchant Fees Explained: What It Costs to Accept Cards
When a customer taps a card, the business does not receive the full amount. A slice is taken out before the money lands, and for a small business that slice is often one of the larger line items nobody has ever looked at properly.
The slice is called the merchant service fee. It is not one charge. It is three, stacked, and only one of them is set by the company that sends you the bill.
The three things to remember
Your merchant service fee is made of interchange, scheme fees and your acquirer's margin. Interchange is the biggest part and is now capped by regulation. Only the margin is negotiable.
The three components
| Component | Who receives it | Can you change it? |
|---|---|---|
| Interchange | The bank that issued the customer's card | No. It is capped by regulation and set by the card type |
| Scheme fees | Visa or Mastercard themselves | No. These are set by the schemes |
| Acquirer margin | Your payment provider or bank | Yes. This is the part you negotiate |
This matters because businesses tend to negotiate with the wrong assumption. If you ring your provider and ask them to cut your rate, the only part they can move is their own margin. The rest is passed through whatever they do.
Many providers quote a single blended percentage covering every card type. It is simple, and it makes it impossible to see whether you are paying a fair margin or a large one, because you cannot separate the regulated pass-through from the provider's own take. Ask for interchange-plus pricing, where interchange is passed through at cost and the margin is stated separately. You may not get it, but the answer tells you something either way.
What is capped, and at what
The Retail Payment System Act 2022 gave the Commerce Commission power to regulate interchange fees. It has used that power twice. Domestic credit card caps dropped on 1 December 2025, and foreign-issued cards were capped for the first time on 1 May 2026.
| Card and channel | Interchange cap |
|---|---|
| Domestic debit, inserted or swiped | 0.00% |
| Domestic debit, contactless | 0.20% |
| Domestic debit, online | 0.60% |
| Domestic credit, in person | 0.30% |
| Domestic credit, online | 0.70% |
| Foreign-issued debit, in person | 0.60% |
| Foreign-issued credit, in person | 0.70% |
| Foreign-issued debit, online | 1.40% |
| Foreign-issued credit, online | 1.50% |
Two categories sit outside all of this. Commercial credit cards, the ones issued to businesses rather than people, are not capped. Neither are domestic prepaid cards. If a large share of your customers pay on a company card, your average cost will run above what the table suggests.
Read down the table and the logic is consistent. Debit costs less than credit, in person costs less than online, and domestic costs less than foreign. A tapped domestic debit card is roughly the cheapest way a customer can pay you. An overseas credit card typed into your website is around seven times dearer in interchange alone.
What the December 2025 change was worth
Take a cafe turning over $40,000 a month on cards, with 60 percent on contactless domestic debit, 30 percent on in-person domestic credit and 10 percent on in-person foreign credit.
Before 1 December 2025, in-person domestic credit was capped at 0.80% rather than 0.30%. The same $12,000 of credit card sales cost this cafe considerably more.
Interchange is a cost your acquirer pays and recovers from you. When the cap fell, their cost fell. Whether your rate fell depends entirely on how you are priced. On interchange-plus you would have seen it automatically. On a blended rate you may not have seen a cent of it, because the blended rate did not change. This is the single most useful thing to check on an old contract.
What you can actually control
Not the card mix, mostly. Customers pay how they pay, and refusing a card type to save 0.4 percent is usually a poor trade against a lost sale. The levers that do exist are narrower and duller than the advice you will read elsewhere.
Surcharging, and where it currently stands
A surcharge is what a business adds to recover the fee from the customer. The Retail Payment System (Ban on Merchant Surcharges) Amendment Bill was introduced in late 2025 with an intended commencement of May 2026, but it did not pass by then and had not passed as at August 2026.
So surcharging on in-store payments remains lawful. What has not changed is the constraint on it. A surcharge that exceeds your actual cost of accepting that payment risks breaching the Fair Trading Act, because it is a representation about cost that is not true. Our guide to surcharges under the Fair Trading Act covers that side in detail.
Many surcharge rates were set years ago against costs that have since been regulated down twice. A flat 2 percent surcharge set in 2021 is now well above the cost of accepting most domestic cards, and a business charging it is exposed on exactly the ground the Fair Trading Act covers. Recalculating it is a short job with a real risk attached to not doing it.
A short list of questions for your provider
What this guide does not cover
Scheme fees vary by scheme and are not published in a form a small merchant can easily check. Buy now pay later, direct debit, account-to-account payments and open banking sit outside the interchange regime entirely and cost quite differently. Commercial card interchange is unregulated and negotiated. This is general information rather than financial or legal advice, and caps change, so confirm the current position with the Commerce Commission before relying on any figure here.
Related guides and tools
- Fair Trading Act surcharges guide, for the rules on passing the fee to the customer.
- Eftpos, debit and credit cards guide, for how each card type actually settles.
- Digital wallets guide, for what a phone payment costs the business.
- GST registration guide, for the other cost that arrives with turnover.
- Business structure basics guide, for the structure the merchant account sits under.
Test Your Knowledge
Ten questions on merchant service fees and interchange caps.
Sources: the Commerce Commission's final decision on interchange fee caps under the Retail Payment System Act 2022, with domestic credit caps effective 1 December 2025 and foreign-issued card caps effective 1 May 2026; and the Retail Payment System (Ban on Merchant Surcharges) Amendment Bill, which had not passed as at August 2026. Confirm the current position with the Commerce Commission before relying on it, and ask your acquirer for your own merchant service fee in writing.