Glossary

Interchange Rate

The interchange rate is a fee that the acquiring bank (the merchant's bank) pays to the issuing bank (the cardholder's bank) during a transaction that utilizes card networks like MasterCard or Visa. This fee compensates the issuing bank for the part it plays in processing the transaction, covering costs associated with credit risk, fraud risk, and the handling of the payment.

Understanding interchange rates is crucial for both merchants and financial institutions, as these fees directly affect the economics of card-based transactions and the broader payment ecosystem.

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