Interchange fees are the consumer-side cost most Caribbean households never see on a receipt — and the single most-misunderstood number in modern payments. You think the merchant is paying for the card-acceptance service; the merchant thinks you are paying through higher prices. The truth is both — the cost is split, but the way it is split depends on the merchant's pricing strategy and the rail the transaction routes through. This article walks through what interchange actually is, who actually pays it, and what your VendaVault changes about the math.
What interchange fees actually are
Interchange is the fee the card scheme (Visa, Mastercard) charges the merchant's bank for processing a card transaction. The scheme keeps a portion; the rest goes to the bank that issued your card. The merchant's bank then bills the merchant for the total cost of acceptance, which includes interchange plus an acquirer fee plus a scheme fee. For a typical Caribbean retail transaction, interchange alone is 1.0% to 2.2% of the transaction value; the all-in cost to the merchant is 2.5% to 4%.
The merchant pays the bank; the bank pays the scheme and the issuer. The shopper does not see a fee line on their receipt. But the shopper has already paid — because the merchant has built the cost of card acceptance into the price of every item in the shop.
Who actually pays interchange
The honest answer: both parties pay, and the split depends on the merchant.
In a perfectly competitive market, the merchant absorbs the entire interchange cost — they cannot raise prices because competitors would not, and they would lose customers to the lower-priced alternative. In a less-competitive market, the merchant passes the entire cost to the customer through higher prices, and the customer pays.
Most Caribbean retail markets are imperfectly competitive (one or two dominant supermarkets per parish, a handful of pharmacies, a few hardware chains). The split in practice is usually 30-50% absorbed by the merchant, 50-70% passed to the customer through prices. Which means: yes, you are paying for interchange. You just are not paying for it on the receipt.
What this looks like in practice
A Kingston supermarket prices its items knowing that about 80% of its sales clear through cards. The card-acceptance cost is roughly 3% blended. The supermarket has built that 3% into its pricing — every item is marked up by approximately 2% above what the same item would cost in a cash-only competitor (assuming the cash-only competitor exists and has the same cost basis).
If you pay with cash, you are still paying the 2% — because the supermarket's prices are set on the assumption of card payment. The cash discount, if any, is captured by the supermarket as additional margin, not passed to you.
If you pay with a card, you are paying the 2% explicitly through the priced-in markup; the merchant passes 3% to their bank, absorbs 1% themselves, and keeps the original margin.
The shopper is paying either way. The card transaction routes the cost transparently; the cash transaction conceals it.
Interchange fees consumer Caribbean: the rail difference
International cards (Visa, Mastercard issued by foreign banks) have higher interchange rates than regional rails. The regional acquirer-issuer pair (Caribbean-issued Visa, processed through Caribbean acquirers like PowerTranz) typically settles at lower interchange than a US-issued Visa processed through a foreign acquirer. The savings on the merchant side are sometimes passed through; sometimes captured as additional margin.
The vault-to-vault rail bypasses interchange entirely. A transfer between two VendaVault accounts settles peer-to-peer without touching the card network. The fee is fixed and small (a few cents), regardless of the transaction value. This is the cheapest possible Caribbean retail rail; merchants who accept it directly save the most on processing cost.
Why this matters for shoppers
Three reasons:
One: it tells you why some prices are what they are. A merchant who explicitly accepts only cards builds card-acceptance cost into every price. The 5% mark-up is not arbitrary; it is interchange and acquirer fees, plus a margin. Understanding this makes the price feel less arbitrary.
Two: it lets you reward merchants who accept lower-cost rails. A merchant who accepts vault-to-vault transfers in addition to cards is paying lower acceptance cost on those transactions. The merchant who can capture the savings and pass them through to customers gets a competitive edge. Choose those merchants when the option exists.
Three: it informs your card choice. Some cards have higher interchange than others — premium credit cards, foreign-issued cards, business cards. If you carry a higher-interchange card, the merchant is paying more to accept it; that cost gets priced into the goods you buy regardless of whether you pay with that card or not. The choice of card has a small but real merchant-side cost.
What VendaVault changes
A vault-to-vault transfer is the lowest-cost rail available. When a merchant accepts it, the interchange-and-acquirer cost they would have paid is mostly avoided. The savings split between the merchant (lower processing) and the customer (if the merchant passes through the savings, lower prices).
A vault-issued token used through a card network still incurs interchange — but the issuer side stays regional, which keeps more of the fee in the region. This is the "regional retention" argument made elsewhere; it applies here too.
Three rules of thumb
- You pay interchange whether or not you pay with cards; it is priced into goods.
- The choice of rail (vault-to-vault, regional card, international card) affects how much of every transaction stays regional.
- Merchants who accept lower-cost rails sometimes pass through savings; sometimes do not. Reward the ones who do.
Open yours
If you have not set up your VendaVault yet, the access to lower-cost rails above is unlocked the moment you do. Three minutes at vault.vendapay.net/register, link the card you use most often, and from your next transaction you have a rail choice that did not exist before. Open your VendaVault →