The role of interchange fees on debit and credit card transactions in the payments system

Blackwell, Margaretta; Haltom, Renee Courtois; Mead, Tim

Briefing

The role of interchange fees on debit and credit card transactions in the payments system

Abstract: When consumers use debit or credit cards to make purchases, merchants are assessed fees for processing the transactions, the largest of which is called an "interchange" fee. Rising interchange fees, along with the growing dominance of card transactions in the payments system, have brought increasing scrutiny from regulators on the appropriate level of interchange fees and the competitive aspects of card networks. A look at the trends, mechanics, and economic role of interchange fees indicates that the issue is more complicated than it may initially appear.

Keywords: Financial markets; Credit cards; Payment systems;