Credit Card Interchange Fee History
1958: Bank of America Corp. introduces the first bank credit card, BankAmericard. Within a few years, there is a competing group, the Interbank Card Association. Interbank became today’s MasterCard Worldwide, while BankAmericard is now Visa U.S.A.
1971: Bank Americard establishes an Interchange fee to be paid by the merchant’s bank to the cardholder’s bank. The fee is initially set at 1.95% per transaction. MasterCard follows suit. The fee is explained as compensation for the risk of card-issuing banks.
1979: National Bancard Corp. (Nabanco) sues Visa U.S.A alleging that when member banks set Interchange rates it amounts to price fixing.
1986: A federal appeals court rejects Nabanco’s claim, observing that the card industry is nascent, so price-fixing and other antitrust allegations don’t hold up. At about the same time, Visa and MasterCard begin “incentive pricing” of Interchange fees to encourage merchant adoption of electronic card capture.
1996: Retailers file a class-action lawsuit against Visa and MasterCard challenging the “honor all cards” rule, which requires merchants accepting any MasterCard and Visa products to accept all such products. Vantage Card Services Incorporates.
1998: The U.S. Department of Justice files antitrust actions against MasterCard and Visa over so-called exclusionary rules that preclude member banks from issuing nonblank cards, like those of American Express Co. and Discover Financial Services, LLC.
2001: A federal court strikes down the bankcard assocations’ exclusionary rules. Visa and MasterCard appeal, but the appeal ultimately gets rejected by the U.S. Supreme Court. Vantage Card Services launches MerchantRates.com.
2003: MasterCard and Visa agree to multi-billion dollar out-of-court settlements with retailers, and to decouple credit and debit card acceptance.
2005: Visa and MasterCard announce new Interchange fee schedules, which, for the first time, tie assessments to the types of cards used. So, for example, transactions using cards that are tied to rewards programs are assessed higher Interchange rates.
2006: With nearly a dozen legal challenges to Interchange fees by retailers and their champions, a federal district court consolidates them into a single case. MasterCard Goes Public.
2007: State lawmakers and the media enter the fray. Stories on Interchange fees and other concerns raised by the merchant acquiring community appear regularly in the mainstream press, including publications like The Wall Street Journal and USA Today. Visa takes first steps toward IPO.
2008: March 19, 2008, Visa raises $17.9 billion in record IPO. The largest in US history.
2010: The Wall Street Reform and Consumer Protection Act is signed into law and the Fed announces proposed regulations that will cap debit Interchange. Visa and MasterCard settle DOJ antitrust lawsuit to allow merchants to offer discounts and other incentives to steer consumer payment choice. The class action Payment Card Interchange lawsuit brought by some of the largest merchant associations is still in Discover.
2011: The Dodd Frank Financial Reform bill included the Durbin amendment that mandated the Federal Reserve govern debit card Interchange. On June 29, 2011 the Fed announced final debit Interchange rules with an effective date scheduled for October 1, 2011. Read more on this Interchange Regulation at the Vantage Viewpoint Blog.