Interchange fee

The Hindu Business Line  Sep 15  Comment 
RBI leaves it to banks to reach a consensus
Banking Business Review  Mar 24  Comment 
NAFCU today hailed the overturning of the lower court decision by a federal appeals court regarding interchange.
Forbes  Mar 21  Comment 
As you swipe your credit card for lunch today, a few different players will take a piece of your payment before the sandwich shop gets its share. Let’s say you bought a $10 sandwich and the merchant will lose 3% on card fees. The lion’s share...
Banking Business Review  Jan 17  Comment 
ACI Worldwide has entered into an agreement with US Financial Services Group (USFSG) to provide consultancy services and assist ACI’s retail customers to manage and reduce interchange fees.  Sep 7  Comment 
NEW YORK ( -- Debit card interchange fees will decrease Oct. 1. This is good news for merchants who have long complained that the interchange fee, also known as a swipe fee, was too high and cut into their profits. The new regulations...  Jul 5  Comment 
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MarketWatch  Apr 5  Comment 
Rep. Barney Frank, the Massachusetts Democrat who helped create the Dodd-Frank Wall Street reform law, on Tuesday said he would support a delay in implementing a reduction in debit-card interchange fees that has impacted the stock of Visa and...
ABRN  Mar 28  Comment 
Interchange fees auto retailers pay banks and card companies for processing debit card sales are once again in the center of a political storm as the Federal Reserve Board writes regulations to implement the 2010 Dodd-Frank law.
Wall Street Sector Selector  Mar 8  Comment 
Filed under: BankingThe Federal Reserve is charged with issuing its decision next month on the fees that financial institutions charge stores every time a customer pays with a debit card. These interchange fees, as they're called, were for years a...
ABRN  Jun 28  Comment 
Aftermarket retailers are crossing their fingers that Congress approves a Senate amendment giving stores relief from the high fees banks charge them to clear debit card purchases. These are also called "swipe" fees. The fees range between...


These are fees paid by one bank to another to cover the handling costs and credit risk in a bank card transaction. Because interchange fees generally flow from the seller toward the bank that funded the transaction, there is some risk assumed by the funding bank in the process.

Consider a credit card transaction - the merchant bank (also called "acquiring bank," as it processes the sales drafts of merchants and pays them together in a lump sum) pays an interchange fee to the bank that issued the credit card. The issuing bank then bills the cardholder. However, the card-issuing bank is now responsible for payment to the merchant bank - and there is no guarantee that the cardholder will make the payment. Meanwhile, when the acquiring bank pays the merchant, it deducts a merchant discount rate - the interchange fee that goes to the issuing bank, plus a profit for the acquiring bank itself.

The interchange fee is a percentage of the transaction amount, and it is derived from an accounting formula that takes into account authorization costs, fraud and credit losses, and the average bank cost of funds.

In ATM and debit card systems, interchange flows in the opposite direction - when a consumer gets cash, the bank that owns the ATM collects the fee.

See also: Credit Card Industry

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