Search by Keyword
This is a term generally used to describe the fee that a merchant is charged when a customer pays with plastic in a store.
More specifically, an interchange fee is the fee a merchant's bank must pay a customer's bank when certain forms of payment (usually credit cards and debit cards) are used to purchase goods. In such a transaction, the merchant's bank is known as the "acquiring" bank, and it must pay the customer's bank (or "issuer" bank) a processing fee for converting a charged payment into a cash deposit in the merchant's checking account. The network of the card used also takes a cut of the merchant payment.
Varying interchange fees often make certain payment types (like cash) less expensive to process than others (like credit cards).
For example: If a consumer buys a soda from a gas station with a credit card, the owner of the gas station must pay a fraction of the soda's cost to the consumer's bank for processing the payment.