Card networks charge transaction fees, known as Interchange Fees, to cover processing costs and manage credit fraud risks across the system. [1, 2, 3, 4]

The interchange fee is paid by the acquirer bank to the issuer bank on every transaction, which is then passed down to the business owner as part of the merchant discount rate: [1]

Interchange Cost = Merchant Gross Sales Value * Network Fee Percentage

Because card networks hold significant market power, regulators impose strict caps on interchange rates (such as the Durbin Amendment in the United States or Interchange Fee Regulations in the EU). These interventions restrict fee percentages on debit cards to protect merchants from high transaction costs and keep retail pricing fair for consumers. [1, 2]