💸 The Great Swipe-Down! 💸

Watch $100 shrink with every swipe!

Burger bash: $96.50

Fry frenzy: $93.12

Shake stir: $89.86

Pie plunge: $86.71

Coffee drop: $83.67

Every swipe shaves a slice!

Swipe less, save more!

Keep cash king to keep the full ring!

Let's break it down step by step using the 3.5% merchant fee as an example:

Understanding the Fee: When you pay with a credit card, the store doesn't get all the money you pay. Instead, a small percentage (in this case, 3.5%) goes to the credit card company and other financial intermediaries as a fee for processing the transaction. This is known as the merchant fee.

Impact on the Dollar's Value: Each time money changes hands using a credit card, 3.5% of that amount is deducted as a fee. So, the value that the recipient actually receives is less than what was paid.

How It Adds Up: Let's say you start with $100 and you use it to buy something with a credit card. The store will receive only $96.50 after the 3.5% fee is deducted.

Continuing the Cycle: If the store then uses that $96.50 to pay for something else with a credit card, the next recipient will get 3.5% less of $96.50, which is about $93.12.

Calculating What's Left: If this process continues, the value that each subsequent recipient receives keeps decreasing because of the 3.5% deduction each time.

Let's calculate what happens after several transactions to see what remains of the original $100:

After 1 transaction: 100 x (1 - 0.035) = $96.50
After 2 transactions: 96.50 x (1 - 0.035) = $93.12
After 3 transactions: 93.12 x (1 - 0.035) = $89.86
After 4 transactions: 89.86 x (1 - 0.035) = $86.71
After 5 transactions: 86.71 x (1 - 0.035) = $83.67

By the end of 5 transactions, the original $100 has reduced to about $83.67. This example shows how the dollar loses value as it circulates through credit card transactions due to merchant fees. 

Where does the merchant fee money go?
Merchant fees, collected when customers make purchases using credit cards, are distributed among several key players in the payment processing system. Here's a breakdown of who typically receives parts of these fees:

1. Credit Card Networks: Companies like Visa, MasterCard, American Express, and Discover are the major credit card networks. They facilitate the transactions between merchants, banks, and cardholders. A portion of the merchant fee goes to these networks for their role in authorizing, processing, and settling credit card transactions.
2. Issuing Bank: This is the bank that issued the customer's credit card. The largest portion of the merchant fee, known as the interchange fee, goes to the issuing bank. This fee compensates the bank for the risks and costs associated with extending credit.
3. Acquiring Bank or Merchant Service Provider: The merchant's bank, or sometimes a specialized financial institution that provides payment processing services, also receives a portion of the merchant fee. This part covers services like setting up and maintaining merchant accounts that allow businesses to accept credit cards.
4. Payment Processors: These entities handle the actual processing of transactions, connecting merchants, merchant banks, card networks, and issuing banks. They ensure that transactions are executed securely and efficiently and typically take a smaller part of the merchant fee for their services.

Each of these entities plays a crucial role in the secure and efficient processing of credit card payments, and the fees they receive help cover operational costs, fraud risk management, technology infrastructure, and other services.