Understanding Interchange Fees
Many people do not realize that merchants must pay a fee every time they accept a credit card payment from a customer. These fees, called interchange fees, are agreed upon by the merchant and the credit card provider. Typically, these charges are 2% of the purchase, plus an additional small fee. Larger businesses, however, may be able to negotiate a smaller fee. In addition, merchants that typically have a lower profit margin, such as convenience stores, grocery stores, and warehouses, are often charged a lower interchange fee.
The type of credit card you use when making a purchase also has an impact on the interchange fee. A credit card that offers rewards, for example, often brings about a higher interchange fee. Similarly, credit cards have a higher charge than debit cards and telephone and Internet transactions are also more costly.
Merchants are in a bit of a catch 22 because they need to accept credit cards in order to get business, but the use of credit cards takes away from their profit margin. Therefore, merchants throughout the world are starting to complain about interchange fees. This is primarily because they see it as a way for the credit card companies to make extra money at their expense since these fees cut into their profits. |
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