transaction cost

Definitions (2)
Related Terms
1. A fee charged by a financial intermediary such as a bank, broker, or underwriter.
2. Economics: The cost associated with exchange of goods or services and incurred in overcoming market imperfections. Transaction costs cover a wide range: communication charges, legal fees, informational cost of finding the price, quality, and durability, etc., and may also include transportation costs. Transaction costs are a critical factor in deciding whether to make a product or buy it. Also called frictional cost. See also transfer cost.

Use transaction cost in a sentence

You need to understand how much the transaction cost will be and be sure to factor that into your budget.
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The transaction cost was something that I didn't like because it meant that I lost some money and therefore had less.
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The transaction cost was too high if we went through our primary bank so we proceeded with our secondary bank.
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Notable Quotable

Hidden Costs Count Just as Much
"Whether you're trying to reduce your own business transaction costs or devise a new way that others can do business more frictionlessly, it's important to factor in all the costs of transactions, some of which tend to be less visible than others. These include the costs of search, information, negotiation, decision-making, policing, and enforcement, just to name a few."
- Tom Murcko


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