Retailers and credit card issuers have long debated the ‘swipe fees’ that should be paid by users for the privilege of 
using their cards. Their battle has been an ongoing struggle to iron out something of an acceptable rate. Now with the Credit Card Fair Fee Act of 2009 retailers hope to get some relief from swipe fees.
The National Retail Federation recently urged the House Judiciary Committee to review and approve legislation to have the major credit card holders of Visa and MasterCard banks to review and negotiate the terms and conditions associated with the card swipe fees paid by retailers and customers. As it stands now Visa and MasterCard set their own interchange rates in concert with their member banks, without any input from retailers or consumers.
Swipe fees have been identified as the second biggest expense that retailers have. This cost is just under the outlay of paying their employees. If customers buy small amounts on their credit cards, or for transactions that have a low profit margin, like gasoline, the price of accepting a credit card chews up any of the profit. Some merchants go so far as to say it would make more financial sense to give items away rather than accept credit cards. Some shop owners have gotten around this by posting signs, “$5 minimum for credit card purchases”. The battle continues because the credit card issuers say that minimum transactions are prohibited because it encourages buyers to purchase more items at the checkout counter so they can be over the intended minimum.
The average interchange or swipe fee is around two percent of the purchase price and nets around $48 billion a year. Not a bad commission for the privilege of using a card. This amount has tripled in the US since 2001.
It is of concern that the swipe fees drive up prices and leaves the lower class people out in the cold. The NRF identified that US households pay on average of around $400 in interchange fees per year alone. These are the fees that are passed down from the retailers to the consumers by adding the interchange fees onto the price of an item.
Interestingly enough to note that Visa Europe recently agreed to cap debit card interchange rates at 0.2 percent for four years. In the US, Visa debit card interchange rate rose to 0.95 percent plus a $0.20 fee for every transaction.
Swipe Fee Relief
Most people are aware of late fees when they use their cards but few realize that swipe fees cost more to them then late fees. Even at the convenience store counter the every transaction has its cost.
Merchants’ petitions signed by 3.7 million consumers want swipe fee reform. An increase in disclosure, transparency is at the heart of the matter. Proposed legislation will require that interchange rates be disclosed to consumers and businesses.
Recently the American Banker Association (ABA) and other banking groups outlined their displeasure with the regulation of interchange rates. Banks have dug in their toes regarding interchange fee disclosure as they outline the fees help offset the cost of infrastructure expenses, point reward programs and security.
Most people understand that electronic payments are convenient and essential, but, they do not want to get gouged in the process.
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