Credit card swipe charges: What they are and how they impact your wallet? | Mint

Credit card swipe charges, also termed as interchange fees. These are charges imposed on a user every time they use their credit cards for transactional purposes.

These charges cover operational expenses such as fraud prevention, processing along with taking care of payment infrastructure. They are controlled and determined by card networks such as Visa and Mastercard. Further, credit card swipe charges are not related to the credit score of an individual under normal circumstances. 

Generally, swiping charges are around 2% of the transaction value for all physical purchases. Further, they are in the range of 2.3-2.5% for online transactions.

Who is responsible for the entire payment process?

There are several different elements that combine to constitute the entire payment process. They are explained briefly below:

• Payment gateway: This gateway transfers encrypted data from the merchant to the acquiring bank. It ensures that the process remains seamless.
• Payment processor: Verifies transaction details and ensures funds are available. It also ensures that any kind of error or fraud is prevented at every step.
• Credit card network: This network is built to foster communication between banks. It also sets swipe charges of every transaction.
• Issuing Bank: It is the bank where the entire process is initiated. It is the responsibility of the issuing bank to pay the acquiring bank on the behalf of the card holder.
• Acquiring bank: Once the payment is done, then the acquiring bank credits the merchant after deducting swipe charges.

Now it is a norm that primarily the merchants bear these charges. Still, they do sometimes pass on the costs on to the customers by increasing prices. This indirectly impacts the wallet of customers. Hence, it is essential to understand how swipe charges work.

What are the reasons for customers to understand this process?

It is crucial to acknowledge the fact that knowledge is the real power. That is why understanding this process is important. Once the customer understands the same it hence makes the entire exercise seamless and easy to comprehend. It also helps the users to:

• Make informed decisions: Know when to use your card or opt for cash.
• Proper budget planning: Know and account for swipe charges in your financial strategy.
• Helps in maximizing rewards: Balance charges against card benefits to maximize value.
• Prevents surprises and hidden charges: Anticipate fees to prevent unexpected billing shocks.

Therefore, staying aware of the swipe charges helps in better financial decisions. It cumulatively helps in maximizing the credit cards benefits and minimizing the hidden costs behind the process.

Further, as a side note it is important for borrowers to realize that taking a personal loan is a serious financial responsibility. It brings with itself the ownership of repayment.

That is why loans should be avoided at all costs until and unless they are required and the borrower has no other option left because with loans comes the responsibility of EMIs and repayment with a hefty interest rate generally and strict terms and conditions. 

(Note: Using a credit card carries its own set of risks)