# Interchange Fee

*Banking & Payments — Finicade finance glossary*

The interchange fee is what a merchant bank pays the card issuer on every transaction — typically 1.5–3% on US credit cards, far less where capped.

The interchange fee is what a merchant's bank pays the card issuer on every transaction, typically 1.5–3% on US credit cards and far lower in capped markets like the EU. It funds rewards programmes, which is why premium cards cost merchants most. Economists note the effect is regressive: merchants raise prices for everyone, and cash-paying customers subsidise cardholders' points.

**Also known as:** swipe fee, merchant discount rate, MDR

**Related terms:** [Card Network](https://finicade.com/glossary/card-network), [Merchant Acquirer](https://finicade.com/glossary/merchant-acquirer), [Debit Card](https://finicade.com/glossary/debit-card), [Credit Card](https://finicade.com/glossary/credit-card), [Payment Processor](https://finicade.com/glossary/payment-processor)

Source: https://finicade.com/glossary/interchange-fee