Interchange Fees are specific fees that credit card companies charge merchants for the ability to accept credit card payments. These fees are part of the larger structure of fees and rates that constitute the cost of credit card processing for businesses.
Generally, these fees are composed of a percentage of the total transaction value and a flat fee per transaction. For example, an interchange fee might be 1.5% of the transaction value plus $0.10 per transaction. The interchange fees are usually passed from the issuing bank to the acquiring bank and then typically passed on to the merchant by the acquiring bank or payment processor.
It is important for merchants to understand the interchange fees associated with different types of transactions as they impact the overall cost of accepting credit card payments. Some merchants may implement surcharging or offer discounts for cash payments as strategies to offset the cost associated with interchange fees.