Sign-Up now for FREE!     Already a member? Login to your account.
FAQs  |  Help  |  About Us
  • My Credit
  • Karma Offers
  • Tools & Calculators
  • Credit Cards
  • Compare Rates
  • News & Advice
  • Blog
  • Top News
  • Q&A
  • Small Business
  • Credit Scores
  • Personal Finance
  • Real Estate

Credit Card Q&A

Question

What is an interchange fee?

Answer

An interchange fee is the percentage of the purchase that credit card companies charge merchants to accept their cards. The exact interchange percentage varies by the credit card issuer (Visa, MasterCard, American Express, and Discover) and the type of transaction (grocery, gas, on-line, in-store). The actual pricing of interchange fees is quite complex and varies according to each card issuer's historical performance experience with fraud and chargebacks for each type of transaction.

While the fees vary, on average, interchange fees are approximately 2% of the transaction value. For issuing banks, interchange fees can be a significant source of revenues. For banks with large portfolios of transactors, consumers who use their credit cards but pay in full every month, it is even more important.

In many ways, interchange fees are the reason that rewards programs and points work as a loyalty program. Banks rely on the interchange revenues to offset the cost of the reward programs. This is a primary reason that few reward loyalty programs offer more than 1%.

Filed under: Credit Card

Comment on Q&A Receive Comment Alerts Send to a Friend Print This Q&A
USER COMMENTS(0)

There are no comments.

Be the first to comment!



Comment On This Question


Try again
Submit Your Comment
Enter Your Comments
Clear Comment
 
Related Credit Card Questions
  • Q.
    What is credit card utilization?
    A.
    Credit card utilization is a metric often used in credit scoring algorithms. It ...
  • Q.
    What is the best credit card?
    A.
    This is a very common question and there is no one answer for all. With hundreds...
  • Q.
    Is it better to pay off a credit card every month or make payments toward the balance every month?
    A.
    It is almost always better to pay off your credit card completely if you have th...
See All Questions & Answers See All Credit Card Questions & Answers
  • About Us |
  • FAQ |
  • In The News |
  • Glossary |
  • Terms of Use |
  • Privacy Policy
Copyright © 2007-2009 Credit Karma™, Inc. All Rights Reserved. Patent Pending.
TRUSTe Verified HACKER SAFE certified sites prevent over 99.9% of hacker crime. Click to verify BBB accreditation and to see a BBB report.
ABOUT SSL CERTIFICATES