Interchange Fee

An interchange fee is a critical component in the structure of payment processing with credit and debit cards. It is a fee paid by the merchant's bank (acquirer) to the cardholder's bank (issuer) for each transaction made using a card. This fee compensates the issuing bank for the cost of handling the transaction, including the risk of fraud and providing credit or funds until the payment is settled.

Interchange fees are a fundamental element of the payment card ecosystem, balancing the need to cover costs incurred by issuers while enabling merchants to offer card payment options to their customers. Despite their utility, these fees are often the subject of regulatory scrutiny and debates over their impact on merchants and consumers.