Interchange fees cost you more than you realize

This is an interesting article from WalletPop, a consumer finance website.  Click here to read.  It talks about the broader economic impacts of interchange fees. While we don’t think that reducing interchange will increase jobs as the article asserts, we do agree that Visa and MasterCard have unchecked pricing power. This pricing power manifests every year in the form of higher dues and interchange fees. While we don’t see any type of broad interchange reform through legislation anytime soon, there are still significant opportunities for merchants to reduce they credit/debit card processing costs. Companies can leverage industry best practices and use least cost routing for debit transactions, manage interchange for optimal rates, get competitive pricing from processing, and introduce alternative payment products. While these initiatives will not eliminate cost of processing non-cash payments, they WILL reduce the burden of swipe fees.


  • MoreThanYouThink

    There is more to the cost of credit card processing than just the rate as you indicated. MasterCard and Visa and lets not forget Discover have increased the cost or merchant processing by increasing their transaction costs as well as the Dues and Assessment piece of the pie. It is estimated that MasterCard and Visa increased their profits by increasing the settlement fee to $500,000,000, that a lot of pennies for doing nothing. These fees have nothing to do with interchange it has to do with pure greed.

    As for the banks, they don’t want to be undone. Remember the good old plain credit card, it is a thing of the past. They are now “Updating” everyone to better cards such as Visa Signature and MasterCard World Cards. Higher interchange. Question how many World Cards does the World need.

    The cardholder is not out of the picture on this either. Everyone complains about the interchange / discount rates. Open up your wallet and tell me what the percent of card are “Reward” Cards. Who do you think pays for this?

    Nothing will be done through legislation as long as we have polititions that that either don’t understand or are looking the other way on how pricing is set and what are justified expenses.

    • anandkgoel

      We agree that cost of card processing goes beyond just interchange fees…other two major costs are assessments and dues from the card networks and acquirer fees. For many merchants interchange fees make up 80-90% of the total cost of processing credit cards. The Durbin amendment is an excellent step in regulating debit interchange fees.

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