General Questions
International Differences
Disclosure & Competition
U.S. Government Action
The Merchants Payments Coalition
Interchange is a percentage of each transaction that Visa and MasterCard banks collect from retailers every time a credit or debit card is used to pay for a purchase. The fee varies with type of card, size of merchant and other factors, but as much as $2 of every $100 you spend goes to card issuers. Credit and debit card interchange collected by Visa and MasterCard totaled more than $42 billion in 2007, up 17 percent from 2006 and 133 percent since 2001. In 2008, the average American family can expect to pay $427 a year in interchange fees. In the case of gasoline, with the price at the pump now more than $4 a gallon, credit card companies and their banks are collecting as much as 9 to 10 cents a gallon in interchange fees, even as they continue trying to keep consumers in the dark about how much they are really paying.
How much do hidden interchange fees cost consumers?
Interchange fees add to the price of everything we buy, even if we choose not to use a credit or debit card. Americans paid more than $42 billion in credit card interchange fees in 2007 alone, more than all other credit card fees combined.
How are interchange rates determined?
Visa and MasterCard each separately work with their member banks collectively to set the price of interchange fees. This is illegal price fixing and it hurts consumers and merchants.
How fast are interchange fees increasing?
Visa and MasterCard collected more than $42 billion in interchange fees in 2007, up 17 percent from 2006 and 133 percent since 2001. In 2008, the average American family can expect to pay $427 a year in interchange fees.
Interchange fees are rising the fastest on gasoline; payouts to the credit card industry have more than doubled since 2004.
Credit card companies and banks are always trying to maximize their profits and collect more revenue from interchange fees when the interchange rate goes up, when more customers use credit and debit cards to pay for purchases, and when total sales volume increases.
Don’t these fees just cover the cost of processing the transactions?
Even though advances in technology continue to bring down the cost of transaction processing, interchange fees keep going up, even though a recent study concluded that only 13 percent of the interchange fees that the big credit card companies collect actually goes for transaction processing. Most of the money goes toward profits for the banks, rewards programs that benefit mostly affluent cardholders and direct mail marketing campaigns that clog mailboxes with nine billion unsolicited credit card offers every year.
Many of those unsolicited mailings include so-called "convenience checks" that can be stolen and cashed by someone other than the authorized card holder. Yet the card companies and their banks spend only four percent of the interchange fees they collect on measures to protect consumers from this and other forms of credit card fraud.
How do interchange rates in the U.S. compare to other parts of the world?
Visa and MasterCard charge Americans among the highest credit card interchange fees in the world. They collected more than $42 billion in interchange fees in 2007, up 17 percent from 2006 and 133 percent since 2001. These increases have occurred even though the technology used to process credit card transactions continues to get more efficient and less expensive. U.S. interchange fees average close to two percent, while in other industrialized countries like Australia and the UK the interchange fee averages less than one percent.
Why are interchange fees so high in the U.S.?
Visa and MasterCard each separately work with their member banks collectively to set the price of interchange fees. This is illegal price fixing and hurts Americans. Credit card interchange fees are up 133 percent since 2001 and there's no end in sight, even though the actual cost of transaction processing continues to go down.
Do consumers who pay with cash also pay hidden interchange fees?
American consumers pay the hidden credit card interchange fee on virtually every purchase they make, whether they use a credit card or not. The system is structured so that credit card companies make more money on each transaction when the price of retail goods increases. For example, even though the cost of processing a $1 transaction is virtually the same as processing a $100 transaction, the interchange fee paid on that $100 sale is higher because the interchange fee is calculated as a percentage of the total sale. The higher the sale, the higher the fee.
Why does MPC single out Visa and MasterCard more than the other card issuers?
Courts have said that, with about 80 percent of the card purchase volume, Visa and MasterCard dominate the market and each controls a fee system that is broken and fundamentally anti-competitive.
Why does the MPC think the interchange system is anti-competitive?
Rather than competing to set the lowest fees and hold down costs for consumers, Visa and MasterCard and their member banks each set rates as high as possible in order to maximize profits for the banks that issue their cards. They are operating two price-fixing cartels that are in clear violation of federal antitrust laws.
Aren’t interchange fees legal because every business establishes a price for the goods and services it provides?
Interchange fees are the result of illegal price fixing by the bank members of MasterCard and Visa. When competitors get together to agree on the prices they will charge, that is price fixing. The card companies themselves each serve as “hubs” to facilitate the unlawful collective price setting by their member banks.
What action is being taken to stop hidden fees?
A rare bi-partisan consensus has emerged that the forces that drive free enterprise should also drive how interchange fees get set. In March 2008 the-bipartisan Credit Card Fair Fee Act, HR 5546, was introduced in the House of Representatives. In June 2008, S 3086 was introduced in the Senate. The House and Senate bills allow for open negotiations and will mean a better credit card system for consumers and merchants alike. HR 5546 and S 3086 use existing negotiating mechanisms already proven to work elsewhere.
Bi-partisan co-sponsors of the Credit Card Fair Fee Act include Representatives John Boozman (R-AR), William Delahunt (D-MA), Louie Gohmert (R-TX), Ralph Hall (R-TX), Zoe Lofgren (D-CA), John Peterson (R-PA), Todd Platts (R-PA), Bill Shuster (R-PA), John Sullivan (R-OK), Anthony Weiner (D-NY) and Peter Welch (D-VT) and Joe Wilson (R-SC). Senate co-sponsors include Richard Durbin (D-IL) and Kit Bond (R-MO).
What is the Merchants Payments Coalition?
The Merchants Payments Coalition (MPC) - UnfairCreditCardFees.com - is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition's member associations collectively represent about 2.7 million stores with approximately 50 million employees.