October 07, 2009
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Americans Pay The Highest Interchange Fees Worldwide, Pt.1
It's all in the costThe cost of goods and ultimate point of sale price consists of many variables including labor, materials, shipping, marketing, and payment transaction fees. Payment transaction fees include debit and credit card interchange fees. Major credit card networks like Visa and MasterCard collect the fee from the merchant which is based on a percentage of each card payment transaction. A portion of the fee is paid to the merchant's bank and a portion paid to the consumer's bank. Interchange fees are listed on the merchant's balance sheets as a business expense. This expense is built into the retail price of merchandise and thereby passed on to all consumers whether they are paying cash, debit, or credit card.
Interchange fees have been the fastest growing expense associated with credit card spending. Consumers paid over $41 billion in interchange fees in 2007 and over the past two years, these fees have nearly tripled. These fees account for the largest portion of credit card fees paid by Americans. In fact, they are greater than the combined total of card annual fees, cash advance fees, over-the-limit fees, and late fees. Across the country, massive interchange fees are forcing small businesses to shut their doors. Businesses like convenience stores that typically have a low average dollar sale, have resorted to higher prices making it very difficult to remain competitive. Furthermore, merchants who provide the convenience of cash back not only pay a percentage of the merchandise transaction but must also pay a fee for the cash back portion.
A recent study released by the “Unfair Credit Card Fees” reported that Americans pay the highest rate of interchange fees in the world. The study which took a look at the amount of fees paid out by 15 major countries, demonstrates an immediate need for U.S. lawmakers to take action in rectifying the rules that allow credit card networks to pilfer Americans out of their hard earned money. Continue on to see the results of the study and learn how U.S. lawmakers have fought back.