Your Receipt Just Got More Confusing
If you run a small business, you've probably heard a version of this pitch: "Some states now ban card issuers from charging interchange fees on the sales-tax and tip portion of a transaction — so you might be entitled to a refund on part of what you've been paying." A handful of states passed laws exactly like that. Then, in June 2026, the federal regulator for credit unions told those states, in effect, "not for our members."
On June 30, 2026, the National Credit Union Administration (NCUA) issued an interim final rule declaring that federal law preempts state restrictions on the non-interest charges and fees — including interchange fees — that federal credit unions charge on credit and debit card transactions. It's a narrow-sounding regulatory move with a very real effect on your bottom line: it determines whether the card-processing math on every swipe, tap, and online checkout stays the same or shrinks slightly, depending on who issued the card your customer just used.
Here's what actually changed, why it happened, and what it means for how you track payment-processing costs.
What Interchange Fees Are, in Plain English
Every time a customer pays with a credit or debit card, three fees typically get carved out of that transaction before you see the money:
- Interchange fee — paid to the bank or credit union that issued the card. This is usually the largest chunk, often around 70% of your total processing cost.
- Assessment fee — paid to the card network (Visa, Mastercard, etc.), roughly 10% of the total.
- Processor markup — kept by your payment processor, roughly the remaining 20%.
Combined, small businesses typically pay somewhere between 1.5% and 3.5% per transaction, with the Visa/Mastercard blended average interchange rate alone reaching 2.36% in 2025 — up from 2.02% in 2010. A typical in-person Visa or Mastercard sale carries an interchange rate around 1.51% plus 10 cents. On a $50 sale, that's not loose change; multiplied across thousands of transactions a year, interchange is one of the largest line items most retail, restaurant, and service businesses never see itemized clearly.
Critically, interchange isn't just charged on the price of the goods or service you sold — it's charged on the entire transaction amount, including sales tax and any tip the customer adds. That detail is exactly what a wave of recent state legislation tried to change.
The State Laws That Triggered This Fight
Illinois passed the Interchange Fee Prohibition Act (IFPA), a law that bars card issuers, networks, and acquirers from charging or collecting interchange fees on the portion of a transaction made up of state and local sales tax and gratuities. Other states have enacted or considered similar legislation. The logic is straightforward from a merchant's perspective: you're the one who collects sales tax on behalf of the government and passes along tips to your staff — you never actually keep that money, so why should a card issuer earn a percentage fee on it?
Banks and credit unions pushed back hard, arguing that carving out tax and tip from interchange calculations would require costly system-wide changes to point-of-sale software and settlement processes, and that a state-by-state patchwork of differing rules would be a compliance nightmare for a payment system built to run nationally and uniformly.
The Office of the Comptroller of the Currency (OCC) sided with the banks first, issuing a preemption rule for national banks. A federal court in Illinois then issued a permanent injunction against most of the IFPA's enforcement based on that OCC action. But federal credit unions weren't automatically covered by the OCC's ruling — a separate federal court in the Northern District of Illinois actually held that existing NCUA rules did not preempt the IFPA for credit union-issued cards. That gap is exactly what NCUA's new interim final rule was written to close.
What the NCUA Rule Actually Says
The interim final rule, effective June 30, 2026, confirms three things in fairly blunt regulatory language:
- Federal credit unions have the authority to impose non-interest charges and fees, including interchange fees, on credit and debit card transactions.
- NCUA — not any individual state — has exclusive authority to regulate how federal credit unions exercise that power.
- State laws that attempt to regulate, limit, prohibit, or otherwise affect a federal credit union's non-interest charges and fees on payment cards are preempted by federal law.
In short: the NCUA is telling states that if you're going to write a law about what a federal credit union can charge on a debit or credit card swipe, that law doesn't apply — full stop, tax and tip included.
Why This Isn't Actually Settled Yet
Here's the part that matters most for how you should plan around this: the legal fight is not over. Courts, not regulators, ultimately decide how much deference the NCUA's interpretation deserves, and a federal court has already ruled once against interchange preemption for credit unions in this exact dispute. Merchant advocacy groups have filed comments opposing the interim rule, arguing NCUA is overstepping its authority. It's entirely plausible this ends up back in litigation, with a different outcome in different circuit courts, or with Congress eventually stepping in to write a uniform national standard.
Practically, that means:
- Don't assume your interchange costs will change in the near term. Whether or not a state's fee-restriction law applies to credit union-issued cards is now genuinely unsettled, so payment processors are unlikely to change how they calculate interchange until the litigation shakes out.
- Expect a patchwork, not a clean national answer, for a while. National bank cards are on one preemption track (via the OCC), credit union cards are on a separate, more contested one (via NCUA), and state enforcement postures vary. Two customers paying with different card types for the identical transaction could technically be subject to different fee rules depending on where a future court draws the line.
- Watch your processor's statements, not the headlines. Regulatory preemption fights move slowly and get resolved by processors updating their fee schedules — often with limited advance notice. If your effective processing rate shifts, it's likely to show up quietly in your monthly statement before it shows up in the news.
Why Credit Unions Are Fighting This So Hard
It helps to know that credit unions occupy a different regulatory lane than banks on interchange to begin with. The 2010 Durbin Amendment capped debit interchange fees for card issuers with more than $10 billion in assets — but explicitly exempted smaller banks and virtually all credit unions from that cap. That exemption is a meaningful revenue stream: debit interchange income for exempt institutions has historically run noticeably higher per-transaction than the capped rate large banks are stuck with. State laws that strip tax and tip out of the interchange calculation would eat directly into that carved-out revenue, which is exactly why credit union trade groups lobbied NCUA so aggressively for this preemption rule rather than waiting for the litigation to play out on its own.
Merchants and retail associations, for their part, aren't staying quiet either. Groups representing convenience stores, grocers, and other high-volume, low-margin retailers have filed comments opposing the interim rule, arguing that NCUA doesn't have the statutory authority to preempt state consumer-protection-style laws this broadly, and that Congress — not a regulator — should be the one deciding whether tax and tip belong in an interchange calculation at all.
What Business Owners Can Do Right Now
You can't control how the litigation resolves, but you can control how well you're positioned to react when it does:
- Ask your payment processor directly whether your effective rate reflects any state interchange-fee exclusions today, and whether that's expected to change. Processors are the ones who actually implement rate changes, so they're a better source than press coverage.
- Segment your card sales by network or issuer type where your POS system allows it. Even a rough split between bank-issued and credit-union-issued transaction volume helps you estimate exposure if the two tracks eventually diverge.
- Keep old statements. If a state law is later upheld and processors owe merchants a look-back adjustment or rebate — as has happened in other interchange disputes — you'll need dated records showing exactly what you were charged.
- Don't restructure pricing around a rule that might not survive appeal. An interim final rule is, by definition, provisional. Building a permanent pricing strategy on it is riskier than treating it as one data point in an ongoing dispute.
What This Means for Your Bookkeeping
Whatever the legal outcome, this episode is a good reminder that payment-processing costs are rarely as fixed as they look on a rate sheet. Interchange rates vary by card network, card tier (standard vs. rewards vs. premium), whether the card was physically present, your merchant category code, and now — potentially — by whether the card was issued by a bank or a credit union in a state with an interchange law on the books.
That variability is exactly why lumping "credit card fees" into one vague expense category makes it hard to spot when your effective rate creeps up. If you separately track gross card sales, interchange/processing fees, and net deposits — rather than just recording the net amount that lands in your bank account — you'll actually be able to see a rate change when your processor implements one, instead of just noticing your margins feel a little tighter. Precise, itemized records also matter if any of this preemption fight eventually produces merchant refunds or rebates tied to a specific state's law; you'll want a clean audit trail showing exactly what you were charged and when.
Keep Your Payment Processing Costs Transparent
Interchange rules are being rewritten in real time by regulators and courts, and the fees on your statement can shift with little warning. Beancount.io gives you plain-text accounting that makes it easy to track processing fees, interchange charges, and net card revenue as distinct, auditable line items — no black boxes, no vendor lock-in, and a complete version-controlled history you can review whenever a fee schedule changes. Get started for free and see why developers and finance professionals are switching to plain-text accounting.