Interchange

Interchange is the fee that the merchant’s bank (i.e. the acquirer) pays to the customer’s bank (i.e. the issuer) when a credit or debit card transaction occurs. This fee is crucial for the functioning of the card payment system and compensates the issuer for the risk and operational costs involved in approving and processing card transactions.

The interchange fee is one component of the overall fee structure associated with card transactions and forms a significant portion of the total cost borne by merchants for accepting card payments. Interchange rates are set by card networks such as Visa and MasterCard and can vary based on several factors, including the following:

  • the type of card used (e.g., credit, debit, rewards),
  • the type of transaction (e.g., card-present, card-not-present)
  • the merchant’s industry (e.g., retail, travel, hospitality)

Merchants should be aware of the interchange rates applicable to their transactions as it directly impacts their cost of doing business.