Which entity is the interchange fee paid to?

Which entity is the interchange fee paid to?

• A. Acquiring bank
• B. Issuing bank
• C. Card network
• D. Merchant

Answer: (B)

Interchange fees are payments that move from the merchant’s bank (the acquirer) to the card-issuing bank. When a card transaction is processed, the issuer bears the risk and funds approval, and the acquirer collects the payment from the merchant and pays the issuer the interchange amount through the card network. The card network acts as the mediator, routing funds and taking a small network fee, but the actual recipient of the interchange portion is the issuing bank. The merchant’s costs end up as part of the overall merchant discount rate, which breaks down into interchange, network fees, and the acquirer’s own margin.

Interchange fees are payments that move from the merchant’s bank (the acquirer) to the card-issuing bank. When a card transaction is processed, the issuer bears the risk and funds approval, and the acquirer collects the payment from the merchant and pays the issuer the interchange amount through the card network. The card network acts as the mediator, routing funds and taking a small network fee, but the actual recipient of the interchange portion is the issuing bank. The merchant’s costs end up as part of the overall merchant discount rate, which breaks down into interchange, network fees, and the acquirer’s own margin.