SOs, your merchants might not like this news: MasterCard International and Visa announced interchange rate increases for many credit and/or debit categories effective April 2003. The buzz on the street is "enough is enough." Many ISOs are still working with their clients on last year's changes.

The associations' rate increases are becoming more frequent and often confounding. In October 2001, Visa announced a steep hike in merchant fees for transactions processed on Interlink, its PIN-based network. Wal-Mart and other major retailers threatened to drop the service. In response, Visa backed down and postponed increases until March 2002 along with the offer of volume discounts to "qualifying" merchants. Then Visa announced it would not raise interchange rates on credit card transactions until October 2002. MasterCard also raised its rates in 2002.

"The nickel-and-diming of the American merchant by the issuing banks is creating growing and serious demand for alternative payment systems," said Bob Carr, Founder, CEO and Chairman of Heartland Payment Systems. "The issuers are applying excessive pressure on the management teams of Visa and MasterCard. They may be getting close to killing the golden goose."

MasterCard's consumer category rate changes:

• Consumer Standard will increase 11 bps* from 2.54% + $0.10 to 2.65% + $0.10
• Merit III will increase 2 bps from 1.38% + $0.10 to 1.40% + $0.10
• Supermarket will increase 5 bps from 1.15% + $0.00 to 1.20% + $0.00
• Public Sector (new), 1.50% + $0.10

MasterCard's corporate category rate changes:

• Corporate Standard will increase 11 bps from 2.54% + $0.10 to 2.65% + $0.10
• Corporate T&E II will increase 5 bps from 2.05% + $0.10 to 2.10% + $0.10
• Corporate T&E III (new), 2.00% + $0.10
• Corporate Data Rate I will increase 10 bps from 2.35% + $0.10 to 2.45% + $0.10
• Corporate Data Rate II will increase 15 bps from 1.75% + $0.00 to 1.90% + $0.00
• Corporate Data Rate III will decrease 5 bps from 1.50% + $0.00 to 1.45% + $0.00
• Corporate Face to Face will increase 2 bps from 1.38% + $0.10 to 1.40% + $0.10

Visa's consumer category rate changes:

• CPS/Retail will increase 2 bps from 1.37% + $0.10 to 1.39% + $0.10
• Consumer Electronic will increase 14 bps from 2.00% + $0.10 to 2.14% + $0.10
• Signature Electronic will increase 4 bps from 2.10% + $0.10 to 2.14% + $0.10
• Consumer Standard will increase 19 bps from 2.30% + $0.10 to 2.49% + $0.10
• Signature Standard will increase 28 bps from 2.35% + $0.10 to 2.63% + $0.10

Visa's commercial category rate changes:

• Commercial Electronic will increase 4 bps from 2.10% + $0.10 to 2.14% + $0.10
• Commercial Standard will increase 13 bps from 2.50% + $0.10 to 2.63% + $0.10

Changes to credit voucher reimbursement fees in the merchant category:

• All Passenger Transport will increase 3 bps from 1.91% to 1.94%
• Non-Passenger Transport Consumer will increase 1 bp from 1.59% to 1.60%
• Non-Passenger Transport Commercial will increase 5 bps from 2.16% to 2.21%
• Select MO/TO and e-Commerce Consumer will increase 1 bp from 1.95% to 1.96%

*bps: basis point(s)