Site Navigation

What is an interchange fee?

in - ter - change fee
noun

An interchange fee is a predetermined fee charged by financial institutions, mainly card-issuing banks, to merchants when they accept credit and debit card transactions. This fee compensates for the processing of these transactions. It's an integral part of the payment process, contributing to the overall cost structure and facilitating smooth payment transactions.
 

How does an interchange fee work?

An interchange fee operates as a pre-established charge that card-issuing banks, in particular, impose on merchants for processing credit and debit card transactions. This fee, determined by card networks like Visa and Mastercard, is collected by the cardholder's bank (the issuer) when a transaction occurs. The issuing bank then shares a portion of this fee with the card network and the merchant's acquiring bank. This system ensures that various entities involved in the payment process receive compensation for their roles.