What is Transaction Fees? Definition and Meaning - Ikajo Glossary

Glossary

Transaction Fees

What are transaction fees?

Transaction Fees is a type of a fee when the client needs to pay every moment it processes an electronic payment. Transaction Fees can vary among the services. On average, the fee is a proportion of the amount of the transfers fulfilled. It is an additional payment for the purchases the merchant has already done successfully.

For instance, some payment processors have their fees as a percentage of a transfer amount. Other ones may add to the percentage a fixed amount. So, the transaction fee might be from 0.5% to 5% or, for example, 2.3%+$0.30.

The fees merchants pay will include:

  • The interchange fee that goes to the issuing bank,
  • The network fee that goes directly to Visa or Mastercard,
  • The acquirer fee that goes to acquiring the bank.

Clients who manage a debit card outside the country are obliged to pay the transaction fees, and they are commonly higher than inside the country. In most cases, it takes two transaction fees, one of them for the payment system (Mastercard or Visa) and the second one for the bank in which you are cashing out the money or making some transfers.

Some examples:

Joey said that the transaction fee in this country is very big so he decided not to withdraw his money from the debit card.

Some financial establishments inform that a Transaction Fees will be higher next week.

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