In the U.S., merchants pay an interchange fee to the card-issuing bank for every credit card transaction. The fee is a percentage of the total transaction amount, and it's typically around 2% for domestic transactions.

The interchange fee covers the cost of processing the credit card transaction and includes the following components:

Acquirer fee: This is the fee charged by the merchant's bank (the acquirer) to cover the cost of processing the transaction. It's typically around 1% of the total transaction amount.

Card-issuing bank fee: This is the fee charged by the card issuer to cover the cost of approving and funding the transaction. It's typically around 1% of the total transaction amount.

The interchange fee is the most important component of the overall credit card processing fee, which also includes a small per-transaction fee charged by the processor (typically around $0.10).

While interchange fees are paid by merchants, they are ultimately passed on to consumers in the form of higher prices. This is because merchants factor the cost of credit card processing into their overall pricing strategy.

So, when you see a price tag that says "2% + $0.10," that's the interchange fee plus the processor's per-transaction fee.

The good news is that interchange fees have been declining in recent years, thanks to a series of reforms enacted by the major credit card networks (Visa, Mastercard, Discover, and American Express).

In December 2020, the average interchange fee was 1.61% for domestic transactions, down from 1.64% in 2019 and 1.67% in 2018, according to the Nilson Report, a leading industry publication.

Looking ahead to 2022, there's a good chance that interchange fees will continue to decline as the credit card networks compete for market share in the wake of the pandemic.

So, if you're a merchant who accepts credit card payments, you can expect to pay less in interchange fees next year. And if you're a consumer, you can expect to see lower prices as a result.