Consumers aren’t the only ones who are paying to use a credit card. VISA, Mastercard, Discover, AMEX are playing the other side of the field as well, charging merchant fees (known as interchange fees) to any business owner who accepts credit cards as payment. This fee is ultimately paid to the credit card company who issues the card to the paying consumer. Talk about double dipping!

Unlike credit card late fees or ATM fees, credit card processing fees are set in secret. Consumers don’t know how much or if they’re paying in higher retail prices in order to offset credit card processing fees.

Merchants paid just shy of 60 billion dollars in interchange fees in 2008, an increase of 24% over 2005, according to a December 2009 report issued by the Federal Reserve Bank fo Kansas City, “An Update of Interchange Legislation in the United States“, by Christian Hung.

Visa and MasterCard control over 73% of the volume of transactions on general purpose cards in the United States and approximately 90% of the cards issued. Since very few people pay with cash or checks these days, merchants are forced to deal within this system. It is simply not an option to refuse to accept Visa or MasterCard from their customers. In order to accept credit cards, merchants are presented with take-it-or-leave-it options and are not part of the process by which the fees are set.

Both the House (HR 2695) and the Senate (S. 1212) have a version of a bill titled the “Credit Card Fair Fee Act”. Some of the provisions:

• Merchants would no longer have to pay higher fees to process “premium cards”. Premium cards are cards that provide rewards to consumers.
• Merchants would be free to post interchange fees.
• Merchants would be free to steer customers into paying in ways which have the cheapest interchange fees.
• Merchants would no longer have to honor all cards in a network but could refuse certain types of cards based on the cost to process. For example, under the proposed legislation, a merchant could accept a regular American Express card, but refuse a Platinum Card if the Platinum card costs more to process.
• Merchants would no longer have to pay penalties for not meeting a minimum of transactions.

It’s unclear to me if this kind of legislation would help or hurt merchants. I accept credit cards, and I pay pretty heft fees for the privilege. If the legislation passes, do I want to lose sales by limiting which cards I would accept as payment? My book store already does not accept American Express and Discover, and I know I’ve lost sales.

On the other hand you could ask why don’t I accept these cards? Because they charge me extra fees to accept them. Hmmmm.

To learn more about these fees and keep up with the latest in the passage of legislation, the website unfaircreditcardfees.com seems pretty thorough.

What is your opinion? Are in you business and seething over interchange fees? Are you a consumer and don’t care if merchants are charged more money? Do you think it affects pricing? Tell us by leaving a comment!

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