What Is a Transaction Fee?
A transaction fee is a charge that is applied to a financial transaction. It can be charged by the seller, buyer, or both parties involved in the transaction. Transaction fees are typically used to cover costs associated with processing and verifying payments, such as credit card processing fees or bank transfer fees. They may also be used to incentivize certain types of transactions over others. For example, some merchants may offer discounts for customers who pay using cash instead of credit cards because it reduces their overall cost of doing business.
Transaction fees vary depending on the type of payment method being used and the amount being transferred. Credit card companies often charge higher rates than other forms of payment due to their increased risk exposure when dealing with online purchases and international transfers. Banks usually have lower rates but they tend to add additional charges for services like currency conversion or wire transfers between different countries. Additionally, digital wallets like PayPal will sometimes impose extra charges if you’re transferring money from one country to another or making an international purchase with your account balance rather than a linked debit/credit card