September 17, 2009
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News: Fighting The Interchange Fee
The war continues to intensify between major credit card networks and merchants over interchange fees. Interchange fees are the fees that merchants pay for each debit or credit card transaction they process. A percentage of the fee goes to the merchant's bank, the card issuer's bank, and the credit card network like Visa or MasterCard. Interchange fees are some of the highest cost factors on a merchant's balance sheet; costing the industry nearly $48 billion a year. Proposed legislation is currently circulating in Congress that would regulate interchange fees and give merchants a louder voice in fee negotiations. Currently, merchants are not invited to the negotiation table which is often conducted without notice.
The credit card reform bill requires the Government Accountability Office investigate interchange fees for review. Meanwhile, merchants are reaching out to consumers and lawmakers asking for their support in their fight against these excessively high fees. Merchants believe consumers should become involved because ultimately the fees are passed on to the end consumer because the fee cuts into the merchants profit margins. Low margins cause merchants to increase prices. On the other side of the fence, sit the credit card companies who say they are provided a valuable service to merchants and consumers who want to pay by card.
A new study by the Merchants Payments Coalition indicates that U.S. merchants pay the highest interchange fees in the world. Interchange fees rank second on merchants expense and yet they are completely blocked from having any say on the subject. Many retailers have had enough and have launched a national campaign against it. Some have YouTube videos and newspaper ads. A major convenience store chain, 7-Eleven have been soliciting with petitions. Retailers are asking for the right to be part of the negotiations between banks, credit card companies, and major card networks. Additionally, merchants want the right to offer discounts or incentives to customer who would choose an alternative method of payment or card and to set minimum purchases when swiping their card.