BACK

Research and Statistics

Credit card fee rules requested by retailers

Summary

Should Congress take control and manage credit card fees charged on every transaction? Retailers say yes.

The editorial content below is based solely on the objective assessment of our writers and is not driven by advertising dollars. However, we may receive compensation when you click on links to products from our partners. Learn more about our advertising policy.

The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Please see the bank’s website for the most current version of card offers; and please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

On July 19, retailers asked Congress to move in and control how much and in what manner credit card companies and issuing banks charge retailers for processing credit card transactions.  Retailers are requesting greater regulation on interchange rates, the fee they are charged for processing a credit card transaction.

Compare Low Interest Credit Cards

In an example of how interchange works, imagine a consumer purchasing a $100 item with a credit card. Of that $100, the retailer would get about $98.  The leftover $2, known as the merchant discount or interchange (which is actually more of a fee), gets broken down, with about $1.75 going to the bank that issued the credit card and $0.25 to the retailer’s bank.  (While a credit card may display the Visa or MasterCard logo, it is issued by a bank, such as Capital One or Chase.)

Additionally, the credit card association or company, such as Visa or MasterCard, bills the merchant monthly for processing transactions.  According to a Visa spokeswoman, the fee amounts to around $0.05 per transaction. This breakdown, based on Visa’s average 1.75 percent interchange rate, may vary.

Each retailer and type of transaction has its own agreement.  Grocery stores, which were reluctant to take credit card payments until recently, have a low merchant fee as an incentive to accept plastic.  Meanwhile, online merchants, which have few choices aside from taking credit cards, have steeper fees than most other retailers.

Representatives of Visa and MasterCard, testifying at a Senate Judiciary Committee hearing, rejected allegations that they are colluding to set high rates, noting that challenges from debit cards and other new payment options mean they must remain competitive.  Also, Visa announced this week that it will make interchange rate factors available online to participating retailers who sign a nondisclosure agreement.

Yesterday, Committee Chairman Arlen Specter (R-Pennsylvania) persuaded the Visa representative to make those rules available to the committee, a move which the Merchants Payment Coalition Inc., a collection of retailers, hailed as an “enormous first step” toward more transparent rules.

What’s up next?

In Research and Statistics

Card use overseas: Beware conversion, exchange fees

Tips for spending overseas and keeping travel credit card fees to a minimum.

Published: June 4, 2006

See more stories
Credit Card Rate Report Updated: October 16th, 2019
Business
15.18%
Airline
17.11%
Cash Back
17.25%
Reward
17.13%
Student
17.29%

Questions or comments?

Contact us

Editorial corrections policies

Learn more

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company’s business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.