Credit Card Fees and the Merchant: Part I

cart32 merchant services tips to selecting the right merchant account providerI recently came across an article written by Daniel Fisher with The main focus of the article is a statement provided by Walmart speaking out against the interchange settlement with credit card companies:

“Walmart, along with a growing number of consumer groups and merchants, is disappointed in the proposed credit card interchange fee settlement. The proposed settlement would not structurally change the broken market or prohibit credit card networks from continually increasing hidden swipe fees, which already cost consumers tens of billions of dollars each year. The proposed settlement would require merchants to broadly waive their rights to take action against the credit card networks for detrimental conduct or acts. We believe the proposed settlement would also constrain emerging payments innovation. As Walmart continues to seek reform that will provide transparency and true competition among financial institutions, we encourage all merchants to put consumers first and reject the settlement.”


Throughout the article Mr. Fisher brings up some interesting points in regards to Walmart’s statement, such as:

  • Who actually pays for credit card fees?
  • If credit card fees went away would prices decrease?
  • Should we set a cap on how much we can charge for interchange?
  • Why don’t retailers offer a discount to customers to pay with cash?


Most retailers understand that accepting credit/debit cards is just part of the game now. The antitrust lawsuit that Walmart referred to was started to help regulate how Visa and MasterCard set their interchange rates. To be honest, I am not 100% sure how the rates are set, but I am determined to find out how and let you all know. Every quarter Visa is posting record breaking profits. In the third quarter alone they profited $1.06 billion, which is $173,000,000.00 over their projected earnings. Visa’s profits do not come from processing fees alone; they also profit from credit card interests, annual fee rates, and much more.


I am all about businesses making a profit, but I only think a profit should be made when a system is built properly and is fair for both parties. Currently it seems as though credit card fees and processing is a one sided ball game. The big credit card companies set the rate and the merchant pays it. The consumer uses a credit card that can have frequent flier miles and they get the miles. The merchant ends up paying a higher fee for processing that card for them. The way the system is currently set up there are three people on the field, but only two get to play.


Over the next few weeks I will be addressing the questions listed above. My end goal is to educate us all on how interchange is established and what are some things you can implement to help offset the costs to your business.

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