Retailers call on Visa and Mastercard to raise fees, which could worsen inflation

Last month, two credit card companies raised some Their exchange rate, or the fee the merchant pays for each credit or debit card transaction. These so-called “swipe fees” are then paid to the issuing bank, but largely invisible to consumers. However, some retailers claim that the increased fees will force them to raise prices or stop accepting certain credit cards altogether.

this Changes in exchange rates— return The credit card company said that includes some price cuts, such as certain transactions below $5 — which were originally scheduled to go into effect in April 2020 but were delayed due to the pandemic.

Two years later, retailers said the timing of the price increases couldn’t have been better, citing the worst inflation in 40 years, an ongoing pandemic, disruptive supply chain issues, soaring costs and general economic uncertainty.

In addition, Doug Kantor, general counsel of the National Convenience Store Association and member of the executive committee of the Merchant Payments Alliance, said the latest increase is on top of fees merchants already pay to credit card companies.

Last year, credit, debit and prepaid cards were used for $9.4 trillion in purchases, According to the Nielsen report, a publication covering the payments industry. Merchants paid about $138 billion in fees on those purchases, Nilson reported.

“The growth a few weeks ago was really just a dog’s tail,” Kanter said, estimating The rate hike will add $1.2 billion to expenses this year.

But when there are many people Opting to use plastic instead of cash, Kantor and others see a greater risk of raising those fees: inflation.

transfer Charge through a complex system different charges Factors such as merchant, transaction size, card type, and banking institution.
in a recent reportsVisa notes that typical swipe fees for its cards include flat-rate fees of about 5 cents to 25 cents and around 1.15% and 3% of the purchase price. For example, if a customer pays $100 with a traditional Visa Rewards credit card at a small merchant, the retailer will pay a fee of $1.53 (1.43% plus 10 cents), which will go to the bank that supports the card.

If fees go up, merchants may have to raise some prices to help offset the fees, Kantor said.

“It really creates this vicious circle: If prices go up a little bit, fees go up a little bit, and prices have to go up to account for an uptick in fees,” he said. “Sometimes inflation is low and it’s not that noticeable. But now when inflation is high, it does accelerate the whole cycle.”

In a statement, Visa noted that these fees are not charged directly to consumers and have nothing to do with inflation or commodity prices. However, it said: “Like any item of their business, merchants price their goods based on cost… Any increase in the amount of interchange fees paid each year generally reflects an increase in merchant transaction or sales revenue. “

Inflation was highlighted at a Senate Judiciary Committee hearing earlier this month About the exchange fee.this hearing Chaired by Senator Richard Durbin, who is 2010 Financial Reform Limit debit card interchange fees.

Retailers are pushing to expand Durbin Amendment to Credit cards are included, but so far, senators have not asked for an extension. Instead, they proposed potential reforms, such as increased disclosure of interchange fees on credit card statements.

“The US card fees are the highest in the industrialized world, and the card system is clearly broken” Leon Buck, vice president of the National Retail Federation, wrote in an email. “This cannot be allowed to continue.”

Visa and Mastercard say the fees have value and purpose: They help fund rewards programs and banking services, and they also help merchants eliminate a significant risk by guaranteeing payments—whether customers pay credit card fees or not—for billing or fraud cases .

Linda Kirkpatrick, president of Mastercard North America, told a Senate Judiciary hearing that banks would cover those costs, which would be higher than what merchants would pay.

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“Retailers are trying to talk about price versus value alone,” said Jeff Tassey, chairman of the Electronic Payments Alliance’s board. “It’s ridiculous, just as it’s ridiculous trying to talk about their margins without value.”

Kirkpatrick testifies before Senate committee This value has been highlighted in the context of the past two years.

“During the pandemic, electronic payments have provided energy to consumers and small businesses,” she said. “In fact, the U.S. government has used our products to quickly deliver critical assistance to vulnerable Americans.”

Ted Rossman, senior industry analyst at, said if the Durbin Amendment does expand to include credit cards, he expects rewards to be cut. However, he said, the prices that merchants charge consumers may not eventually drop.

“Retailers said they would lower their prices if they paid less for card processing, but there’s no evidence they did after the Durbin amendment, and I seriously doubt they would do it now,” Rothman said.

Without addressing those fees, some businesses may try to respond by charging surcharges or not accepting credit cards, which could lead to customer churn, especially in an increasingly digital economy, Rothman said.

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