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.
“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.
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. “
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.
“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 CreditCards.com, 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.