Interchange is not a single number set by a network. It is a regulated price in some markets, an unregulated one in others, and a patchwork even within a single card brand. The same debit transaction can carry an interchange fee of around 0.2 percent in London and well over 1 percent in Dallas, on the same scheme, with the same plastic. If you price merchant fees, model issuer revenue, or design routing logic, you cannot reason about interchange without knowing which regime the transaction sits in.
Module 3 covered how interchange works as a mechanism. This module covers why its level differs so sharply by region, and why that difference is structural rather than temporary.
Two regulatory philosophies
The split traces back to two different theories of what interchange is for.
The European view treats interchange as a cost that merchants are forced to bear and that ultimately reaches consumers through higher prices. The regulatory response is a hard percentage cap, applied broadly across consumer cards. The US view, expressed through the Durbin Amendment, treats interchange as a fee that should be "reasonable and proportional" to issuer cost, and only for debit, and only for large banks. One regime caps a price. The other caps a cost basis for a subset of issuers. That distinction explains almost every difference that follows.
The United States: Durbin and Regulation II
The Durbin Amendment, part of the 2010 Dodd-Frank Act, directed the Federal Reserve to cap debit interchange for large issuers. The Fed implemented it through Regulation II, effective in 2011.
The cap applies only to issuers with $10 billion or more in assets. For those issuers, the maximum interchange is 21 cents plus 0.05 percent of the transaction value, plus a 1 cent fraud-prevention adjustment for issuers that meet the fraud standards. So a covered debit transaction tops out near 22 to 24 cents on a typical purchase.
Three features make the US regime narrow. It covers debit only, never credit. It exempts smaller issuers entirely. And the exempt tier behaves like an unregulated market: Federal Reserve data shows exempt issuers earning far more per transaction than covered ones, with average dual-message exempt interchange around 62 cents in 2023 against the roughly 23-cent capped figure. That gap is why a debit card from a community bank can cost a merchant several times more than one from a money-center bank.
A worked example
Take a $40 in-person debit purchase.
A card issued by a large covered bank carries interchange of about 21 cents plus 0.05 percent of $40 (2 cents) plus the 1 cent fraud adjustment, so roughly 24 cents.
The same $40 purchase on a Visa or Mastercard signature debit card from a Durbin-exempt issuer can run far higher. Fed figures put exempt signature debit interchange in the 40-to-60-cent range for a transaction this size. The merchant has limited visibility into which card is which at the moment of sale, which is exactly why least-cost routing (Module 8) matters so much in the US.
A live legal wrinkle
The cap is also contested. In August 2025, a federal district court in North Dakota vacated Regulation II, finding the Fed exceeded its statutory authority. The court stayed its own ruling pending appeal to the Eighth Circuit, so the 21-cent cap remains in effect today. A separate Fed proposal to lower the base component to 14.4 cents is still pending. Treat the US number as a moving target, not a settled constant.
The European Union: the Interchange Fee Regulation
The EU took the broader path. The Interchange Fee Regulation (Regulation 2015/751), effective from December 2015, caps consumer interchange at 0.2 percent for debit and 0.3 percent for credit.
Two things stand out against the US model. The EU caps credit as well as debit, and it applies the cap regardless of issuer size. There is no small-issuer exemption to create a high-fee tier. The result is a flatter, lower interchange landscape across the bloc.
The EU cap also has clear carve-outs worth knowing. Commercial cards (corporate and business cards) sit outside the consumer caps, which is why commercial interchange in Europe remains high and why merchant groups have lobbied to pull them in. Three-party schemes like American Express, which issue and acquire themselves, fall outside the standard caps unless they license third-party issuers. Cash withdrawals are excluded too.
The same example in Europe
That same $40-equivalent purchase, say a 35 euro consumer debit transaction inside the EU, carries interchange of 0.2 percent, or 7 euro cents. A consumer credit transaction of the same size carries 0.3 percent, about 10.5 cents.
Compare that to the US exempt-debit figure of 40 to 60 cents on a similar ticket. The European merchant pays a small fraction of what a US merchant pays on an exempt card, on the same scheme, for the same act of buying. That is the patchwork in a single comparison.
The United Kingdom: the same caps, separately maintained
The UK inherited the EU IFR and retained it after leaving the bloc. Domestic UK interchange stays at 0.2 percent debit and 0.3 percent credit for consumer cards where issuer, acquirer, and merchant are all in the UK.
The interesting movement is cross-border. After Brexit, UK-EEA consumer transactions where one party sits outside the other's jurisdiction fell outside both the UK and EU caps. The schemes raised those cross-border rates sharply. The UK Payment Systems Regulator intervened, and the practical effect is a cap that pulls UK-EEA cross-border consumer interchange back toward 0.2 percent debit and 0.3 percent credit. The lesson for practitioners: "UK rate" is not one rate. Domestic, intra-EEA, and cross-border legs can each price differently even on the same card.
Why this matters for the people who ship
Three operational consequences fall out of the patchwork.
Pricing models cannot assume a global interchange constant. A blended cost-plus rate built on EU assumptions will badly underestimate US debit on exempt cards, and a US-anchored model will overstate European cost.
Issuer revenue forecasts depend entirely on which side of a threshold a bank sits. A US issuer crossing $10 billion in assets sees its debit interchange roughly cut overnight. A European issuer of any size already lives under the cap. Same business, different economics, set by a regulatory line rather than the market.
Routing logic is regional. Least-cost routing delivers real savings in the US precisely because the exempt tier creates wide fee dispersion. In a fully capped EU market, the dispersion is narrower, so the routing lever pulls less.
Takeaway
Interchange level is set less by what a transaction costs to process and more by which regulator governs it. The US caps a subset (large-issuer debit) and leaves a large unregulated tier; the EU and UK cap broadly across consumer debit and credit with no issuer exemption. Before you quote a fee, model issuer revenue, or design a routing rule, the first question is not "what scheme" but "what jurisdiction, what product, and which issuer tier." Get that wrong and every downstream number is wrong with it.