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Table of Contents

Lead Story

Interchange: What gives?

Patti Murphy
The Takoma Group


Industry Update

Sun setting on PCI version 1.1

Bohemia, payments style

No wiggle room with Red Flag Rule

Processing for newbies

VeriFone turns triple play


GS Advisory Board:
What's up in this downturn? - Part II

The payments doctor is in

Interchange in brief

Industry Leader

Stuart C. Harvey Jr. –
In the zone


Building relationships - priceless

Biff Matthews
CardWare International


Street SmartsSM:
MLS compensation options

Jason Felts
Advanced Merchant Services

PCI vendors: Welcome to the jungle

Tim Cranny
Panoptic Security Inc.

What's your business?

Daniel Wadleigh
Marketing Consultant

Admit, own, fix your bloopers

Jeff Fortney
Clearent LLC

Reduce stress, raise retention

Curt Hensley
CSH Consulting

Be calendar-wise

Adam Atlas
Attorney at Law

Sweet-spot MLS training

Christian Murray
Global eTelecom Inc.

New Products

Mobile computing for feet on the street

Dolphin 9900 Mobile Computer
Honeywell International Inc.

Back office synergy online

Synergy Express
Jack Henry & Associates Inc.


Revamp that problem mindset





Resource Guide


A Bigger Thing

The Green Sheet Online Edition

September 08, 2008  •  Issue 08:09:01

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Interchange in brief

Many merchants are distraught about the rising cost of interchange. They have even joined forces to spur state and federal regulators to legislate it. But interchange is not the evil that many merchants and politicians make it out to be. Following are facts designed to help merchant level salespeople communicate to merchants about the true purpose of interchange and why it is a necessary part of electronic payment acceptance.

  • Interchange fees are set by Visa Inc. and MasterCard Worldwide. Merchants pay interchange fees, typically between 1.75 and 2 percent per transaction in the United States, to card issuing banks. (MasterCard)

  • Factors that influence interchange fees include: the type of card, rewards programs, signature as opposed to PIN debit, the volume of transactions a merchant generates over the card networks, and the merchant type - grocery, gas, hospitality, e-commerce and so forth. (Payments System Research)

  • In 2006, issuers of Visa- and MasterCard-branded card products received $30 billion in interchange revenue, an 85 percent increase over 2001. Additionally, the United States has some of the highest interchange fees in the world. (Payments System Research)

  • The top five credit and debit card issuing banks - JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp., Capital One Bank USA, N.A. and HSBC Bank USA, N.A. - control 90 percent of all credit card accounts in the U.S. (Diamond Management and Technology Consulting Inc.)

  • Rewards cards and card not present transactions have a higher interchange rate than standard credit cards and card present transactions. Credit cards, in turn, are higher than signature debit, which brings a bigger rate than PIN debit. (Visa and MasterCard)

  • The original purpose of interchange fees was to cover the costs associated with card processing. Today, only 13 percent of interchange goes to processing; 44 percent goes to paying rewards programs; and 35 percent cover the cost of funds and profit margins. These figures do not include all costs associated with interchange, such as credit and fraud losses, operating costs and online access, to name a few. (Diamond)

  • In July 2008, Visa implemented a 95 cent maximum interchange charge for debit fuel transactions to help offset the current high price of gas. (Visa)

  • The legislative battle over interchange pits banks and other financial services companies, represented, in part, by the Electronic Payments Coalition, against retailers - about 2.7 million stores with approximately 50 million employees - represented by the Merchants Payments Coalition. (Capitol News Co.)

  • Interchange fees account for a quarter of card issuer revenues. (Federal Reserve Bank of Minneapolis)

  • Since 2004, retailers and their trade groups have filed over 50 lawsuits against credit card associations and card-issuing banks. Merchants complain that interchange fees represent price fixing by Visa and MasterCard. (Food Marketing Institute)

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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