Payments and fintech
Interchange fee
The fee the merchant's bank pays the cardholder's bank on each card payment.
Facts checked against sources onWhat does Interchange fee mean?
Interchange is a fee, set by the card scheme, that the acquirer (the merchant's bank) pays to the issuer (the cardholder's bank) each time a card is used. It is usually a percentage of the payment, sometimes plus a small fixed amount, and it pays for the issuer's costs, fraud risk and rewards. Example: on a 100 purchase with interchange of 1.5 percent, the issuer receives 1.50. Rates vary by country, card type and merchant, and some are capped by law. The European Union's 2015 Interchange Fee Regulation caps consumer debit at 0.2 percent and consumer credit at 0.3 percent, and in the United States the Durbin Amendment caps debit interchange for large issuers.
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Related terms
- Merchant discount rate (MDR)The total fee a merchant pays to accept a card or digital payment.
- IssuerThe bank or firm that gives a customer a card and, for credit cards, takes the credit risk.
- AcquirerThe bank or firm that lets a merchant accept card payments.
- Card scheme (card network)The network that sets the rules and connects issuers and acquirers, such as Visa or Mastercard.
- Basis points (bps)One hundredth of a percent: 100 basis points make 1 percent.
- Take rateThe share of each transaction's value that a platform keeps as revenue.
- Buy now, pay later (BNPL)Paying for a purchase in a few interest-free instalments, with the merchant paying a fee.
- Real-time paymentsAccount-to-account transfers that settle in seconds, at any hour.
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