Sunday, January 31, 2010

Interchange Fees: the Silent Visa Tax

As we've seen the federal government tackle credit, debit and gift cards, new attention is gearing up toward card network interchange fees. Interchange fees are the cost of using debit and credit cards charged to merchants for use of the network (Visa, Mastercard, etc.). The fees are about $.75 for every $100 spent and more than if the consumer uses the a debit card and enters their pin number. The GAO's November 2009 report on Rising Interchange Fees found the fees are posing a problem for merchants as they comprise a larger amount of the revenue earned with some merchants complaining that the benefit of cards such as lower labor costs and increased sales are outstripped by the cost of the interchange fees. The fees are enough that some discount retailers, like Costco, don't accept credit cards, but will allow the debit card usage. Of course, retailers cannot possibly refuse to accept VISA cards, for instance, so the fees are here to stay. While the fees may be here to stay, I suspect that the size of the fees will cause them to come under regulatory supervision at some point in the not so distant future. That seems to be the common result when greed and overreaching get to a point that complaint is loud enough. With small business owners trying to keep their businesses afloat during a recession, it is easy to see why there is more compaint about the size of interchange fees.

The New York Times just did a nice video (and article) giving a pretty good overview of the tension between the networks, merchants and ultimately consumer interests.

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1 comment:

Bill said...

Great article.

Congress may finally start to wake up on this issue. I work on behalf of The Credit Card Con and we are working with small business owners around the country to make a stand on this silent tax.

I encourage you to check out to get more info!