Interchange Fees | B2B Finance Glossary
Oct 20, 2023 by Zazil Martinez
What Are Interchange Fees? Interchange fees, or “swipe fees,” are fees a merchant must pay every time a retailer processes a credit or debit card payment. Interchange fees are designed to pay card issuers for their work when accepting, processing, and authorizing card transactions. For example, when a customer makes a purchase using their debit or credit card, many things need to happen on the backend to ensure that this payment goes through, namely, requesting and receiving payment authorization for ensuring there are enough funds in the customer’s account to make the payment, fraud protection, and finally, processing the payment itself. A small portion of the interchange fee goes toward the credit card processing service, and the rest goes to the bank or credit card company tied to the card that the customer uses to make the purchase. Typically, interchange fees include a small fixed fee plus a percentage of the total sale; however, these fees and rates vary depending on the merchant category code associated with the business making the transaction, which company has issued the card to the consumer, and the credit card processing service that allows the entire system to keep running.
Read More