Destination charge

Definition

A destination charge is a funds-flow pattern in platform payments: the charge is created on the software platform’s account, then some or all of the money is transferred right away to a connected merchant or seller. Public platform-payments documentation (the Connect charge types) uses this name for that immediate transfer. The platform usually takes an application fee from the same payment. Processor fees, refunds, and chargebacks typically debit the platform, not the connected account, unless the program is set up so the connected party is treated as the settlement merchant.

This page is the routing pattern, not the fee and not the license. Adjacent terms are Vertical Fintech’s. They are not this page. Application fees (the platform cut), direct charges (the connected account is charged as the merchant), separate charges and transfers (move money later, not on the same charge), interchange-plus, and PayFac-as-a-service sit next to this definition.

Why it matters

If you embed payments in vertical software, destination charge is the usual marketplace-shaped flow: the buyer pays your platform, you keep a cut, and the seller gets the rest without you becoming the PayFac. That convenience is also the risk. Statement descriptors, tax, and dispute liability often sit with the platform because the charge was created on the platform account. If your lawyers or your bank partner need the connected business to be the merchant of record, this is the wrong charge type. Read the processor’s charge-type docs for the program you actually signed, not a blog paraphrase. Ask who the customer sees on the card statement, who pays refunds and chargebacks, and whether an application fee is required. Do not treat destination charge as a residual model you own.

Related on Vertical Fintech

• Payments: PayFac-as-a-service and platform payments. Take a rate on merchant volume without becoming a PayFac.
• Application fee: The platform cut often attached to a destination charge.
• Stripe Connect: Default start for platform payments. Destination charges are one of the three documented charge types.
• PayPal Complete Payments Platform: Seller onboarding and partner fees with the processor holding licensed funds flow. Adjacent split, not this charge-type name.
• Adyen for Platforms: Global acquiring and split payouts. Same job (buyer pays, seller is paid), different product language.

FAQ

Who takes refunds and chargebacks on a destination charge?

Usually the platform, because the charge was created on the platform account. Public Connect docs say processor fees, refunds, and chargebacks debit the platform unless you configure the connected account as the settlement merchant. Confirm that on your actual program. Do not assume the seller eats disputes.

Is a destination charge the same as a direct charge?

No. A destination charge is created on the platform and transferred to the connected account. A direct charge is created on the connected account as the merchant. Statement, liability, and fee behavior change with that choice. Pick the charge type for who should be the merchant of record, not for which word sounds faster.