Every time you make a payment with a credit card, invisible money flows in various directions.

If you've ever wondered, "Who takes the card fees and where do they go?" take a light read.

Payment Fees (Interchange) – The Issuer's Pocket

• When a card is swiped at a merchant terminal, about 1 to 3% of the payment amount automatically goes to the 'issuer's share'.
• With this money, issuers fund rewards budgets like points, mileage, and cashback, and cover costs for fraud insurance and customer service operations.

Network Fees – Card Brands like Visa and MasterCard

• To put the Visa, MasterCard, or Amex logo on a card, a brand usage fee is charged.
• Although it's just a few cents per transaction, due to the sheer volume of transactions worldwide, it becomes a core revenue source for the networks. This money is used for system maintenance, hacking prevention, and expanding international payment networks.

VAN, PG, Acquirer Fees – Payment Infrastructure Operating Costs

• In Korea, VAN (Value Added Network) companies and PG (Payment Gateway) companies set up terminals and assist with settlements, while abroad, Acquirers (merchant banks) do the same.
• They operate with a per-transaction fee (around 0.05% to 0.3%) to maintain servers, install terminals, provide A/S, and run fraud detection solutions.

Merchant Fees (MDR) – The Combined Cost of These Three Types

• The actual 'card fees' that merchants bear is the sum of the above 1+2+3.
• If a small café pays 2%, approximately 1.5% goes to the issuer, 0.15% to the network, and 0.35% flows to PG/VAN.

Summary at a Glance

  1. Consumer → Merchant Payment

  2. Merchant → Transfers Fees to PG/VAN, Network, Issuer

  3. Issuer/Network → Reinvests in Rewards, Systems, Security, etc.

  4. Consumer Additional Fees (annual fees, interest, etc.) are used for issuer operations and risk management

Ultimately, behind the convenience of a 'single card' are various companies involved, each providing a range of services from security maintenance to reward distribution with the fees they receive.

Understanding these fee components makes it easier to choose a card that fits your spending patterns, so keep this in mind.