Interchange Fee
A fee charged between banks for processing card payments.
Detailed Description
Interchange Fee
What is an interchange fee?
An interchange fee is a charge paid between banks for card-based transactions, specifically from the acquiring bank to the issuing bank when a consumer uses a card.
Why do interchange fees exist?
Interchange fees compensate issuing banks for risks like fraud and chargebacks, cover transaction processing costs, and support the electronic payment infrastructure.
What factors influence interchange fees?
Factors include the type of card used, transaction nature (in-person vs. online), merchant industry, transaction amount, and associated fraud risk.
What are the different types of interchange fees?
Types include flat-rate fees, percentage-based fees, tiered fees, and dynamic pricing structures.
How do interchange fees impact merchants and consumers?
For merchants, interchange fees are a business cost affecting profit margins; for consumers, they can indirectly influence prices of goods and services.