Contents tagged with Merchant Rates

  • Interchange Analysis by the GAO

    Visa and MasterCard Interchange rate schedules have become increasing more complex, as hundreds of different Interchange fee rate categories for accepting credit cards now exist.

    In 1991, Visa and MasterCard each had 4 standard domestic credit card interchange fee rate categories. By 2009, Visa had 60 and MasterCard had 243 different rate categories that could be charged to card transactions, although not all of these rates apply to all merchants.

    The increase in the number of rates occurred as different types of merchants and cards were added to their Interchange rate schedules. For example, the networks introduced new rates for certain industries that previously had not accepted cards (such as energy utility companies or government agencies) or for new methods of shopping (such as … more

  • GAO Interchange Study Option 1: Limiting or Capping Interchange Fees

    Setting or limiting Interchange fees would need to address who would regulate, at what level to cap rates and which payment types would be included in the regulation to name just a few. Beyond these implementation questions, others should be considered like, will greater regulation bring more secure, innovative, alternative payments to market faster or will this regulation slow R&D?

    A significant advantage of capping or limiting interchange fees would be that it would reduce interchange fee costs most directly. The GAO study did not make any recommendations but rather posed various scenarios of capping Interchange at current levels, setting a maximum rate, setting at a level significantly below the current rates, apply caps to select Interchange rate categories like rewards cards or … more

  • GAO Interchange Study Option 2: Requiring the Disclosure of Interchange Fees

    Requiring Interchange fees to be disclosure to consumers would provide information about payment costs in an effort to influence consumer choice. However, information alone is not likely to have the desired effect of stopping people from pulling out their reward card. Plus, significant implementation costs for both the merchant and the issuer along with the level of confusion on the part of the consumer who would need to be educated on the payment industry pricing structures.

    Disclosing information about Interchange fees to consumers would incur the costs of updating technology and signage to allow for such disclosures. For disclosure in merchant receipts, merchants would incur the cost of changing their receipts. Issuers would incur cost of changing card statements to add disclosures. more

  • GAO Interchange Study Option 3: Loosening Restrictions on Merchants for Card Acceptance

    Prohibiting card networks from imposing rules on merchants, such as those that limit merchants’ ability to discriminate among different types of cards or levy a surcharge for credit cards is one of the most popular remedies designed to hold Interchange rates in check.

    The GAO reports that removing the anti steering rules appears to have various advantages. Merchants could surcharge or refuse certain cards, make cardholders using rewards cards more aware of and to bear more of the cost of the rewards from which they benefit. This option also may require the least intervention, as merchants could decide whether to add surcharges or refuse certain cards based on their own customer mix. In addition, the potentially anticompetitive effects of these rules are also the subject of a … more

  • GAO Interchange Study Option 4: Allowing Merchants and Issuers to Directly Negotiate Interchange Fees

    This option involves granting antitrust waivers to allow merchants and issuers to negotiate Interchange rates. Collective bargaining by commercial groups, such as groups of merchants or businesses, can violate U.S. antitrust laws, an exemption from those laws would be necessary to facilitate such a process.

    Valid concerns exist that such negotiations could harm small merchants and small issuers, which do not have as much leverage as larger participants and, in some cases, lack the resources to participate in bargaining sessions. It would be difficult to ensure that small issuers and small merchants benefited from collective negotiations. Small merchant would find it difficult to participate in such negotiations because of limited resources.

    A significant legal barrier to implementing … more

  • Keys to a Level 3 Merchant Account

    Accepting Commercial Cards

    Commercial credit cards are being used to replace inefficient and expensive paper purchase order processes by businesses, corporations and government agencies with payments estimated to reach $185 Billion by 2010. Accepting commercial credit cards like Corporate, Business, Purchasing and GSA cards are an important component of a company’s payment policies.  Optimize your commercial card acceptance with a Level 3 merchant account. 

    Keys to a Level 3 Merchant Account

    Insist on an Interchange pricing structure Interchange is the largest cost component of delivering merchant services and for merchants accepting commercial cards, eliminating non-qualified surcharges are especially important. Direct Interchange pass through pricing is the most … more

  • PIN Debit Punishment Pushed Back

    Visa and MasterCard set a mandate effective July 1, 2010 to ensure that all installed PIN pads are using the most up to date triple data encryption standard (3DES) for processing PIN debit transactions.  In an effort to enforce this mandate, fines were slated to be imposed on those deemed out of compliance.  While technically, the July 2010 deadline is still in place, the threat of punishment has been pushed back.  The new policy isn’t threatening fines until Aug. 1, 2012, however Vantage will continue working with our clients to ensure compliance by July 2010.

    The most interesting part of the article as reported on StorefrontBacktalk was that several of the nation's largest chains were threatening to abruptly cut off PIN debit at the deadline, possibly switching to … more

  • More Intelligent Merchant Rates

    As a merchant, do you feel the fees you pay for accepting card payments are too high?  I’ve not talked to anyone in business who thinks they aren’t paying enough for merchant services.  If you’ve been following the Interchange debate, you realize the Interchange fee paid back to the issuing bank is the target of reform.  And while Interchange reform is a healthy debate, for most businesses, it’s beside the point.  They don’t get Interchange pricing.

    Most small and mid sized businesses don’t pay Interchange pricing, they pay discount rates and service fees set by their service provider, processor or bank.  The most common pricing structures are based on formulas, bundles, tiers and definitions invented by their payment … more

  • The Merchant Interchange Debate Continues

    This week the National Retail Federation and the Merchants Payments Coalition released a 14-page report, entitled, “’Swipe Fee’ Reform--International Lessons” lobbying in favor of regulating Interchange. Focusing on what other countries are doing around the world and arguing that Interchange fees are ultimately borne by consumers, the MPC’s report can be found at:

    On the same day, as reported in Reuters, The Electronic Payments Coalition issued the following statement: Today, the Electronic Payments Coalition released key evidence from several sources, demonstrating conclusively that consumers would be hurt by interchange regulation in the form of higher fees, fewer benefits, and zero savings at the cash register. Despite the … more

  • B2B suppliers accepting commercial card payments

    As reported in a recent U.S. Banker article titled P-Cards Have Promise, approximately 16 percent of B2B suppliers accept commercial cards for U.S. B2B payments citing Interchange fees as a factor limiting p-card growth.  

    We have found through our extensive work in the B2B payments space that many businesses who are accepting commercial card payments are not qualifying for the lowest Interchange rates available.  For those businesses who don't accept commercial cards, a misunderstanding of costs is often the reason. Two of the most common problems business face is not having the proper merchant account pricing structure and using the wrong payment processing technology. 

    For many small businesses, they started accepting commercial cards because a large customer … more