Interchange income description

Interchange income description

• A. Income from debit/credit card transactions
• B. Interest on loans
• C. Fees from share drafts
• D. Dividend income

Answer: (A)

Interchange income describes the revenue a card issuer earns when a member uses a debit or credit card. When a transaction occurs, the merchant’s bank pays an interchange fee to the card-issuing bank, with the rate set by the card networks. This fee is usually a percentage of the transaction plus a small fixed amount. This money becomes part of the issuer’s non-interest income and specifically comes from card processing, not from lending or investments. It’s not interest on loans, not fees from share drafts, and not dividend income. So income from debit/credit card transactions is the best match.

Interchange income describes the revenue a card issuer earns when a member uses a debit or credit card. When a transaction occurs, the merchant’s bank pays an interchange fee to the card-issuing bank, with the rate set by the card networks. This fee is usually a percentage of the transaction plus a small fixed amount. This money becomes part of the issuer’s non-interest income and specifically comes from card processing, not from lending or investments. It’s not interest on loans, not fees from share drafts, and not dividend income. So income from debit/credit card transactions is the best match.