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DEFINITIONS

Interchange Rate

Definition

Interchange Rate is a fee that a merchant's bank pays a customer's bank when the merchant accept credit or debit cards. The fee is charged by the bank that funds the transaction for bearing the handling costs and the risk. The card-issuing bank deducts the interchange fee from the amount it pays to the merchant's bank. The latter then pays the merchant the amount of the transaction minus  the interchange fee and an additional, usually smaller fee for its own services.
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