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What are credit card swipe charges? Here’s your guide

Key Takeaways

Credit card swipe charges, also known as interchange fees, are determined by the card network and are typically paid by merchants for processing transactions.
Although customers do not pay these charges directly, they may indirectly bear the cost through slightly higher product prices or restricted payment options.
Understanding the payment process, including gateways, processors, and issuing banks, can help you better evaluate how transactions are completed.
Being aware of swipe charges can enable you to make informed payment choices, manage expenses effectively, and maximise rewards without unexpected costs.

22 May 2026 by IDFC FIRST Bank

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Credit cards are widely used for both online and offline payments. While customers focus on only the benefits of the cards, it is vital to get to know everything there is to know about credit cards, so you can save money and make the most of them.

Read on to understand what credit card swipe charges mean, how swipe machine fees work, and what to expect at every step of a card payment.

How to redeem your Credit Card Reward Points?

What is a Credit Card?

Credit Card Payment Process

Before getting into credit card swipe charges, let us first understand credit card-related terminologies. Here is a summary of the relevant terms:

1. Payment gateway

A payment gateway relays information between two key stakeholders in a credit card transaction – a payment portal (such as a website to book movie tickets or an e-commerce website) and your bank's processor. It also authorizes responses from the  credit card issuing bank to the payment portal. This exchange of information takes place at the payment gateway.

2. Payment processor

The merchant contacts the issuing bank through a payment processor. The payment processor secures payment-related information and transmits it to other parties.

3. Credit card network

Merchants can contact the issuing bank through the credit card network. Credit card swipe charges, too, are set by the credit card network.

4. Issuing bank

The bank that gives you your credit card is called the "issuing bank." For instance, if you get IDFC FIRST Bank’s  Millennia credit card, IDFC FIRST Bank will be the issuing bank.

5. Acquiring bank

The acquiring bank accepts credit card transactions made by you. The acquiring bank is registered with a credit card network and accepts transactions on the network on behalf of the merchant.

What is a credit card swipe fee?

We can now understand "credit card swipe fee" better with a preliminary understanding of the related terms. A credit card swipe fee is also known as an "interchange fee" and is determined by the credit card network.

For instance, if you get IDFC FIRST Bank’s Millennia credit card, Visa will fix credit card swipe charges.

How are we charged when swiping credit cards?

Here is what happens when we swipe our credit card at a Point of Sale (PoS) machine:

· The cardholder swipes their credit card at a PoS terminal. The PoS terminal has a "card reader" that reads credit card information. The merchant uses a payment gateway to collect this information.

· The payment gateway transmits the transaction's information to the payment processor.

· The payment processor relays this information to the credit card network.

· This information is received by the issuing bank, which verifies the card details. The issuing bank informs the credit card network whether it approves or denies a transaction after checking whether the card has the required balance and checking for any fraudulent details.

· The credit card network relays this information to the payment processor, which relays it to the card reader.

Who pays credit card swipe fees?

Credit cardholders must remember that merchants and, sometimes, issuing banks charge credit card swipe fees every time the credit cardholder makes a payment using their credit card. With this final point, let's summarize credit card swipe fees in a few points: 

· When you make a credit card transaction, a "credit card swipe fee" is charged by the merchant.

· The credit card swipe fee is determined by the credit card network, consisting of the issuing bank.

· The Reserve Bank of India (RBI) regulates issuing banks' credit card swipe charges.

· Credit card swipe charges amount to approximately 2% of all transactions involving a physical credit card, and 2.3-2.5% of online transactions.

Impact of swipe charges on customers

Although swipe charges are primarily borne by merchants, they can indirectly influence your overall spending experience. These charges are typically a percentage of the transaction amount paid by the merchant to the bank or payment network. However, in some cases, businesses may factor these costs into their pricing strategy.

Higher product pricing: Merchants may slightly increase the price of goods or services to offset swipe charges, which can lead to a marginal rise in your overall expenses.

Limited payment options: Some smaller merchants may prefer cash or UPI payments to avoid these fees, restricting your ability to use Credit Cards in certain places.

Minimum transaction requirements: You may notice minimum billing amounts at certain outlets for card usage, introduced to manage transaction costs.

Discount variations: Occasionally, discounts offered on cash payments may be higher than those on card payments, due to the associated charges.

While the impact may not always be directly visible, being aware of how swipe charges influence pricing can help you make more informed payment decisions.

Advantages of knowing credit card swipe charges

Understanding Credit Card swipe charges can help you manage your expenses more efficiently and use your card wisely. Here are some key benefits:

Better decision-making: Knowing these charges can enable you to choose between card, cash, or digital payments, depending on the situation.

Clarity on total costs: It can help you understand the complete cost of a transaction beyond just the purchase value.

Improved budgeting: Awareness of additional charges allow you to plan your monthly expenses more effectively.

Maximising rewards: You can evaluate whether the rewards or cashback earned outweigh the indirect costs associated with card usage.

Avoiding billing surprises: Tracking such charges can ensure there are no unexpected costs in your monthly statement.

Conclusion

The key to using your credit card effectively is learning everything about the product, including concepts such as swipe charges and other credit card charges. Knowing the details of swipe charges is an important step in understanding the full potential of a credit card and how it can best be used for your benefit.

Frequently Asked Questions

What are credit card swipe charges? Who pays them?

Credit card swipe charges, also known as interchange or merchant discount rates (MDR), are the fees applied when a customer makes a payment using a credit card at a Point of Sale (PoS) machine or online. These charges are typically paid by the merchant to the acquiring bank and card network for processing the transaction. The cost is shared among the issuing bank, acquiring bank, and card network.

What are the credit card swipe charges in India?

In India, swipe charges usually range between 1% and 2% of the transaction value for physical transactions. For online payments, the charges may be slightly higher, typically around 2% to 2.5%. These rates can vary depending on the type of card, transaction mode, and agreements between merchants and payment service providers.

What is the difference between a payment gateway, a payment processor, and a credit card network?

A payment gateway acts as the interface that securely captures and transmits transaction details from the merchant to the bank. A payment processor handles the technical processing of the transaction, forwarding data between the merchant, issuing bank, and card network. A credit card network (such as RuPay, Visa, or Mastercard) facilitates communication between banks and sets rules, including swipe charges.

Do customers pay credit card swipe fees?

Customers do not directly pay swipe charges. However, merchants may indirectly factor these costs into product pricing or impose minimum transaction limits for card usage. As a result, while not explicitly charged, customers may bear the cost indirectly through pricing strategies.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirst.bank.in for latest updates.