What are interchange fees?
Interchange fees are charges paid by the acquiring bank to the issuing bank for each card transaction. These fees compensate the issuer for providing the card, managing risk, and funding the transaction.
How are interchange fees calculated?
They are usually calculated as a percentage of the transaction value plus a fixed amount. The exact rate depends on factors such as card type, transaction method, and merchant category.
Why do interchange fees exist?
They support the card ecosystem by compensating issuers for fraud risk, credit provision, and operational costs. They also fund cardholder benefits such as rewards programmes.
Who pays interchange fees?
Merchants indirectly pay interchange fees as part of the overall cost of accepting card payments. These fees are included within the merchant discount rate or processing charges.
Can interchange fees be negotiated?
In most cases, interchange fees are set by card schemes and are not negotiable. However, merchants can influence overall costs by choosing different pricing models or optimising transaction types.