What does Interchange Fee mean?

In credit card transactions, an interchange fee is an amount payable by the acquirer to the issuer. In other words, the acquirer is that banking institution which represents the merchant, while the issuer is considered the banking institution which issued your credit card. However, there is a great difference between a fee paid for those purchases which involve only online transactions and the ones where the POS terminal is used, where the online transactions will charge a much higher interchange fee. Usually the interchange fee does not exceed 3% of the purchase’s total amount.