A card payment that appears to be a single transfer from shopper to shop is in fact divided among four parties. The largest slice, interchange, is paid to the cardholder's bank rather than the merchant's.
Four parties stand behind every transaction
The cardholder's bank issues the card, the merchant's bank acquires the transaction, and the card network routes the messages between them. The merchant sits at one end and the shopper at the other.
Money moves in the opposite direction to the authorisation request. The issuer pays the acquirer, the acquirer credits the merchant, and a fee is deducted at each handover along the way.
Because the roles are fixed by network rules, the pricing is fixed alongside them. Who bears which cost is decided centrally rather than negotiated sale by sale.
Interchange flows to the card issuer
Interchange is the fee the merchant's bank pays the cardholder's bank on every purchase. It is consistently the largest single component of the cost of accepting cards.
The issuer uses that income to fund credit risk, fraud losses and any rewards attached to the card. A card that pays generous points is expensive to operate, and interchange is where much of that money originates.
This is why premium credit cards carry higher interchange than plain debit cards. The reward the cardholder enjoys is prefunded from the merchant side of the same transaction.
The network takes a smaller, separate cut
Card networks charge assessment and switching fees for routing and settling each message. These are far smaller than interchange, but they apply to every transaction without exception.
Networks do not lend money and do not hold the customer relationship. Their revenue tracks transaction volume rather than credit risk, which keeps their pricing thin and comparatively stable.
That difference in role explains the difference in scale. Routing a message costs a fraction of what carrying an unpaid balance costs.
Acquirers bundle it all into one merchant rate
Most merchants never see the components. Their acquirer quotes a single blended rate that absorbs interchange, network fees and the acquirer's own margin.
Blended pricing is simpler to administer but hides variation. A month heavy with premium card use costs the acquirer more, and that cost eventually shows up in the merchant's rate.
Larger merchants often move to interchange-plus pricing, where the pass-through cost and the acquirer margin are itemised separately. Visibility comes with more complicated statements.
Why the split rarely appears on a receipt
The shopper pays the ticket price regardless of which card is used, so none of this is visible at the till. The cost is embedded in the merchant's pricing instead.
That embedding is the reason the system is stable and also the reason it is contested. Merchants argue they subsidise rewards, while issuers argue the fee funds guaranteed payment and fraud protection.
Understanding which party receives which fee makes the argument legible. The dispute is not about the total but about which end of the transaction should carry it.