Credit card fee rules requested by retailers

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.

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.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on 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.

Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.

Updated: 03-24-2019