NACS Study: US Pays More for Interchange “Swipe” Fees

September 18, 2009

A new study by the Merchants Payments Coalition finds that Americans pay a much higher percentage for interchange charges than the rest of the industrialized world.

WASHINGTON, DC – A new study by the Merchants Payments Coalition (MPC) found that if U.S. consumers paid the same low credit and debit card swipe fees as consumers in Australia pay, then the net benefit would have totaled $125 billion over the last four years.

Interchange fees, or “swipe fees,” cost Americans an average of $2 on every $100 they spend with credit cards — a higher percentage than anywhere else in the industrialized world. Why? Because other countries and their governments have been able to negotiate with the big banks and credit card companies for fair rates and transparency, the MPC notes. NACS is one of the founding members of the MPC.

But, in the United States merchants and their customers are still forced to pay sky-high interchange fees.

Interchange fees started out in the 1960s as a way for banks to cover the cost of processing credit card transactions. But even as technology has dropped that cost dramatically, the banks and credit card companies have pushed swipe fees higher and higher, turning it into a cash cow. For many businesses, credit card fees are now their single-highest non-labor operating cost.

With almost any other equipment, supplier or service, retailers can comparison-shop, negotiate or otherwise influence its final cost of doing business. Store owners can conserve on energy usage and seek out the most competitive prices for merchandise, just to cite a few examples.

Not so with credit card interchange fees. Visa and MasterCard control more than 80 percent of the marketplace. They set the fees in secret, give businesses no ability to negotiate and virtually insist they be buried in the price of merchandise. Unfortunately, the card companies’ hidden fees get passed on to all consumers in the form of higher prices and lower value for nearly everything they buy.

“It’s bad enough that the credit card companies force these hidden fees on us and our customers when we can least afford it,” noted NACS Vice Chairman of Government Relations Tom Robinson, president of Robinson Oil Corporation. “But when we are paying more than anywhere else in the world, and other countries have taken action to protect their citizens from abuse, it is inconceivable that our government would turn a blind eye to the issue. It is time for Congress to step up and defend the principles of the free-market economy by taking action on (interchange) fees.”

Though Congress and the White House have addressed other credit card reforms, the MPC is arguing that any fix will be incomplete without addressing interchange fees. Consider:

Banks raked in an estimated $48 billion in interchange fees in 2008 – an average of $427 per American household in just one year.

  • This $48 billion total is more than triple the amount collected as recently as in 2001.
  • Hidden interchange fees cost Americans more than all credit card annual fees, cash advance fees, over-the-limit fees, and late fees combined.
  • U.S. interchange fees are the highest in the developed world. The U.S. pays approximately 60 percent of interchange fees globally – about double the U.S. percentage share of global GDP.

Compared to the rest of the world, U.S. interchange fees are more than two times the rates in the U.K. and New Zealand, four times the rates in Australia and more than six times the cross-border rates recently agreed upon by MasterCard and the European Union.

Meanwhile, the payments industry has back with its own “study.”

In a September 17 press release, Visa announced the findings of a new study that shows that “consumers believe retailers benefit far more from accepting credit and debit cards than they pay in costs.

The press release noted that consumers believe merchants see card cost acceptance as a part of doing business, much like paying for utilities such as electricity.

“Retailers and their well-funded trade associations have filed lawsuits and are aggressively lobbying Congress to allow them to shift their business costs to consumers by allowing merchants to charge checkout fees whenever consumers use credit or debit cards. At the same time, national convenience store chains have launched misleading, in-store petition campaigns to cover for their checkout fee efforts, noted Visa’s press release.

“The response is loud and clear: consumers aren’t buying the message convenience store chains and big retailers are selling,” said Bill Sheedy, group president of the Americas for Visa Inc., in the release. “This research demonstrates that consumers are well aware that legislation is a Trojan horse that likely will lead to higher prices for cardholders while retailers pocket the savings.”


“Swipe Fee” Reform – International Lessons (via

September 18, 2009

Click here to read the recent report profiling interchange merchant interchange fees rates.  U.S. credit card interchange fees ~2X rates in UK, New Zealand.  ~4X rates in Australia. ~6X cross border MasterCard rates in the EU






[Source:, Merchants Payments Coalition]

“Not only do other nations provide lower interchange rates, but we can also learn from other countries’ experiences with interchange reform. Major countries around the world have addressed interchange reform, with some already demonstrating beneficial results for their economies. In particular, lessons learned from experiences in Australia, New Zealand, Canada, and the European Union, provide instructive examples about why interchange reform makes economic sense in the U.S. – especially now.” Cartoon

May 13, 2009

Click here, “Interchange Able”

$25 Oil vs. $60 Billion Visa & MasterCard Interchange Fees?

December 4, 2008

The greedy banks and auto industry execs failed their shareholders and Americans. Their mismanagement is being rewarded with billions, or is it trillions in free money?

Everything has turned upside down.

Accountability is irrelevant and Washington lobbyists are all powerful.   Look at today’s Merill Lynch & Co assessment that oil might soon be trading at just $25 a barrel, according to a Bloomberg report.   If gas can plunge from nearly $150 to under $50 in just a few weeks, due to the economic seizure, why are the Visa and MasterCard merchant interchange fees – fueled by its member banks – continuing to rise? 

Something is very broken and wrong.

Tulips, Silver, Housing Market and Oil Speculators Have Nothing on MasterCard and Visa

November 30, 2008

Fight Unfair Credit Card Fees

The credit card interchange fee is the biggest credit card fee you’ve never heard of.  Nearly $2 of every $100 American consumers spend using credit cards go directly to the credit card industry through the interchange fee.

In 2007 alone, America consumers paid over $42 billion in credit card interchange fees.  Even consumers who don’t use plastic pay more through higher prices.

And the credit card interchange fee is set in secret – consumers don’t know they’re paying it through higher retail prices.  Interchange fees have risen a staggering 133% since 2001.

A rare bi-partisan consensus has emerged:  HR 5546/S 3086, The Credit Card Fair Fee Act which stops the price-fixing by the credit card industry and uses a transparent market-based process.

New On


“Coalition of Retailers Seeks Action” (via El Paso Times)

October 5, 2008
Article posted from El Paso Times – By Vic Kolenc

Pharmacist Greg Matthews uses a sign to inform customers about payments at Workers Choice Pharmacy.

Greg Matthews tries to discourage customers at his East Side pharmacy from using credit cards to pay for prescriptions because transaction fees on cards cuts into his already slim profit margin.

Private “insurance reimbursements are so bad, then you add the credit card (fee) to it, and they’re is just no profit at all,” said Matthews, owner of Workers Choice Pharmacy at 10501 Gateway West.

A lady the other day paid her $80 co-pay” on a $120 prescription with a credit card. “I was going to make $3.48,” but the credit-card fee took $1.98 so Matthews only made $1.50 on the transaction, he said. The other day a customer was going to pay a $1.05 prescription payment with a credit card, and “I said, ‘Forget it.’ I just gave it to him” because of the credit-card fee, he said.

Robert Barron, co-owner of Barron’s Superette, a small grocery store at 7555 Acapulco on the East Side, has a different view. He said he doesn’t mind paying the fees for credit cards and debit cards because those cost his store less than handling checks.

“It’s better to pay the fees than have to worry about insufficient fund checks, or checks you can never collect on,” Barron said. Barron estimated 90 percent of his customers now pay for their groceries with a debit or credit card, or food-stamp card.

In August, Barron’s paid $1,072 for debit- and credit- card fees, which includes fees by a company which processes the electronic payments for his store, Barron said.

Matthews said he pays an estimated $2,000 to $2,500 a year in credit-card fees for his small business.  Credit-card transaction fees, specifically the interchange fee set by credit- card companies and collected by banks that issue the cards, have become a hot issue with retailers in recent years.

The Merchants Payments Coalition, a national group of retailers, including supermarkets, drug stores, convenience stores and others, has been campaigning to lower the fees. The coalition is pushing for legislation in the U.S. Congress to set up a mechanism to let retailers negotiate card transaction fees with the credit-card companies. Some members of the coalition also are part of pending lawsuits consolidated into one case in a New York federal court alleging price-fixing of fees by MasterCard, Visa and several banks.

“What we want them to do is negotiate with us (merchants) a price fair for their service,” said John Motley, senior vice president for the Food and Marketing Institute in Washington, D.C., a member of the coalition. “The reason the issue is so big for us (grocery stores) is the average profit within the food retailing industry in the U.S. is about 1.2 percent.” The credit-card fees increase product costs to consumers, he said.

“Interchange fees for credit-card transactions average around 2 percent of each transaction dollar amount,” Motley said. Supermarkets were offered a low interchange fee years ago to encourage supermarkets to accept cards, but that “rate is now disappearing” because premium credit cards are becoming more prevalent and have a higher fee, he said. Fees on debit cards used with a PIN number average around one-half percent, which is not as much of a problem, he said.

Gasoline retailers earlier this year began complaining about being hurt by rising credit-card fee costs because customers were charging larger amounts due to rising fuel prices. MasterCard and Visa made adjustments in fee charges for fuel retailers, the companies said in statements issued this year.  Last year, $42 billion in interchange fees were collected, and this year that number is projected to grow to almost $49 billion, Motley said. That is a 16.7-percent increase. Only a small portion of the fees go for transaction costs, he said.

Visa and MasterCard, the nation’s two largest credit-card companies, said the companies each set their own card interchange rates, but they receive no revenue from interchange fees.  The interchange rate is what the merchant’s bank pays to the cardholder’s bank for taking on the risk, said Denise Dunckel, a Washington, D.C.-based spokeswoman for Visa. “Visa makes its money from contracts with banks,” she said.

Sharon Gamsin, a spokeswoman for MasterCard’s headquarters in the New York City areas, told the El Paso Times in May that MasterCard makes its money from fees it charges banks that issue cards.

The interchange fee is part of a merchant discount fee, which is negotiated between the merchant and its bank for credit-card and debit-card transactions, according to information from MasterCard.  The interchange rate is set high enough for banks to have an incentive to issue credit cards and low enough to encourage businesses to accept the cards, the credit-card companies said.

“I think merchants are getting a good value for what they pay for. The alternative (cash or checks) costs more” to handle,” said Linda Echard, president and CEO of ICBA Bancard in Washington, D.C., an Independent Community Bankers of America subsidiary that provides credit-card services to community banks. The interchange and merchant fees are important revenue sources that allow banks to stay in the credit-card business, she said.

In Australia, where the government stepped in and reduced interchange rates, the number of cards being issued has decreased, Echard said. A MasterCard statement said Australian credit- cardholders are now also paying higher interest rates and fees because of the decrease in interchange rates.

For more information:;

Credit fee facts
Interchange fees average 2 percent of the dollar amount of each transaction and are paid by a merchant’s bank to the cardholder’s bank to compensate the bank for risks and costs of maintaining credit- card accounts.

Merchants pay for interchange fees and other fees attached to credit- and debit-card transactions through a merchant discount fee. That fee goes to the merchant’s bank.

Visa and MasterCard said they make no revenue directly from interchange fees, but get their money through charges to banks that issue credit cards in their systems.

How to Support The Credit Card Fair Fee Act

September 18, 2008

Click here and tell your elected representatives to support HR 5546/S 3086, The Credit Card Fair Fee Act.