Credit Card Fees Consumers May Not Know About

Consumers don’t always realize how much of their purchases are made up of credit card fees

Shaun Plum
MoneyTips Contributor

Borrowing Fees Credit Cards

Credit Card Fees Consumers May Not Know About
March 29, 2016

When making a purchase using a credit card, consumers aren’t simply buying merchandise or paying for services from a merchant; instead, they are involving several third parties in the transaction. These third parties include the company that issued the credit card, the bank used by the merchant, and the network handling the transaction. All of these parties take a small cut of the total amount paid, leaving the merchant with a smaller amount of profit from each item sold.

Each of these parties is, however, vital to making a credit card purchase. The payment network involved is perhaps the most important, even though they are the least understood by consumers. These different networks, which include Visa, MasterCard, and Discover, first initiate a conversation with the issuing bank via an automated system. They query the issuer to check the authenticity of the card and the amount of credit available to the consumer. Some even check to see if the purchase is in line with the consumer’s spending habits to help identify a fraudulent transaction.

Once approved, the network approves the transaction and notifies the merchant’s bank. This charges the account. The card issuer and the merchant’s bank both take their cut, which is usually between two and three percent of the total charged. The network also charges a fee to handle the transaction. This interchange fee is determined by a contract between the network and each bank that issues or accepts payments via credit card.

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irene | 03.29.16 @ 18:17
Very interesting. I never really knew that another party got a cut of the money
Nancy | 03.29.16 @ 18:17
I didn't know that that is how it works. I figured there was money involved on all sides though.
Carla | 03.29.16 @ 18:18
I really had no idea how many people were involved in making a credit card purchase. I guess I need to read the fine print more closely.
Erin | 03.29.16 @ 18:20
This doesn't surprise me. Everyone wants their cut for services provided. But, if it helps merchants move their product, I think it would be worth giving up a small cut of the profits.
Heather | 03.29.16 @ 18:20
I have been to stores that will charge you a few if you are using a credit card. Which makes that ridiculous since they are already getting a cut.
Meredith L | 03.29.16 @ 18:22
I used to own a few ATM machines and there is indeed extra fees often built in for using your credit cards, especially when taking extra money out. A percentage always goes to the vendor, and a percentage oftentimes goes to the retailer, the bank, and money processor...
Elaine | 03.29.16 @ 18:22
Yikes, seems like everyone has their hands in that money. Interesting how everyone has a part of the fee.
gracie | 03.29.16 @ 18:29
I knew there were a ton of fees but I was totally unaware of some of the places they were going to? Very informative! I love getting info like this and the benefits of our credit cards we don't always know about
Daniel | 03.29.16 @ 18:29
This shows even more reasons to research and know what you are getting into when signing agreements with some of these compaines
$commenter.renderDisplayableName() | 06.17.21 @ 17:45