What is Switching Fee in Credit Card Transactions ?

Switching Fee in Credit Card Transactions – In general the credit card business module is majorly covering the three types of fees i.e. Switching fees, Interchange Fees and Merchant Discount Rate (MDR) besides others.  The switching fees is levied as a commission by the card network provider for settling the credit card transactions in favor of merchant’s bank. The switching fees is different than the Interchange fees which is being paid by the merchant’s bank to the card issuing bank.

Switching fee is similar to the commission collected by the card network providers like, Amex, Visa, MasterCard etc for routing the transaction and authorization, clearing and settlement between the parties like issuer, Merchant’s Bank or acquirer bank and Merchants.

The fees is charged by the Card Issuing institutions like VISA, MasterCard, Amex or Rupay based on each transaction and varies between 0.15% to 1% of the transaction amount.

Also Read – What is Annual Percentage Rate (APR) in Credit Card ?

For example – 

Credit Card Issued by Citibank in association with VISA is swiped at Amazon store. The banker for Amazon is American Express. In this case the Switching Fees will be paid by Citibank (being an issuer of the credit card) to Card Network provider VISA. Where as the Interchange Fees will be paid by American Express to Citibank being the acquirer bank.