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National Association of Convenience Stores – News & Media Center, April 1, 2005
Interchange Rates Rise Today
Along with other retail organizations, the National Association of Convenience Stores (NACS) is expressing deep concern over increases in Visa and MasterCard interchange fees scheduled to go into effect today saying that a steady string of increases is driving up costs for consumers. Mallory Duncan, Vice President of the National Retail Federation (NRF) and General Counsel said in a press release yesterday that “This is a hidden tax increase for American consumers, “When Visa and MasterCard arbitrarily increase the fees charged to merchants, those costs are forced into the price of merchandise, and consumers are the ones who end up paying.”
NACS’ Sr. VP for Research and Public Affairs, Teri Richman, agrees with Duncan. “The convenience store industry is very concerned about these increases, particularly in our environment where fuel prices and the use of card based payments are also rising.” Citing Duncan’s quote from the NRF press release dated March 31, she concurred that “retailers are seriously looking at their alternatives. Banks are on the verge of killing the goose that laid the golden egg.”
Both Visa and MasterCard have announced interchange increases that are scheduled to take effect today. An average is difficult to calculate because of the complicated fee structure, but the increases range from 2.7 percent for Visa Consumer Standard Credit to 9 percent or more on typical retail purchases for MasterCard Corporate Face-to-Face transactions. In addition, some transactions are being moved into new categories, having the effect of a rate increase for merchants even where published rates are unchanged. Fees for a few categories of transactions will decrease slightly, but most will increase.
The April increases are part of a long-term trend in rising interchange rates. A recent Morgan Stanley report found that the weighted average for Visa and MasterCard interchange had increased from 1.58 percent in 1998 to 1.75 percent in 2004 and is forecast to grow to 1.86 percent in 2010. Dollar volume has grown from $9.4 billion in 1998 to $17.4 billion and is projected to reach $32.4 billion in 2010.
Interchange is a percentage of each transaction – sometimes accompanied by a flat fee – that banks collect from retailers every time a credit card or debit card is used to pay for a purchase, adding up to billions of dollars each year. Concern over rising interchange rates has risen to the level that the Federal Reserve Bank of Kansas City has scheduled a conference on the issue to be held in May.
Reserve Bank of Australia Credit Card Reforms
On 27 August 2002, the Reserve Bank of Australia (RBA) released its final reforms to credit card schemes in Australia. The reform measures involve:
The elimination of the ‘no surcharge’ rule allowing merchants to charge a fee or surcharge for credit card transactions from cardholders. This came into effect on 1 January 2003.
The adoption of a new cost based approach to the calculation of domestic interchange fees in credit card schemes. This is effective from 31 October 2003.
An access regime that allows non-banking financial institutions to become eligible members of credit card schemes. The commencement date for this element of the reforms is yet to be determined….
The Banker: Australia slashes credit card interchange fees
Published: 03 November, 2003
Interchange fees for credit card transactions in Australia are to be virtually halved following tough action by the Reserve Bank of Australia (central bank) and the failure of an appeal by Visa, MasterCard and BankCard in the federal court.
Interchange fees for credit card transactions in Australia are to be virtually halved following tough action by the Reserve Bank of Australia (central bank) and the failure of an appeal by Visa, MasterCard and BankCard in the federal court…