Another over looked consequence of the debit Interchange revisions, effective October 1st, is the impact on cardholder refunds due to changes in the Visa ‘Credit Voucher’ program.
Visa has made modifications to its Credit Voucher Interchange fee program to coincide with other operational changes to comply with the new debit regulatory requirements ushered in by the Federal Reserve such as capping regulated debit card Interchange rates.
Credit Voucher Interchange fees are paid to the merchant acquirer (processor or service provider) by the card issuer when cardholder refunds are processed. This is the reverse of what happens during a sale transaction where the merchant pays a discount rate to accept the card payment.
With this Visa adjustment, the processing volume for debit card refunds will transition from an Interchange reimbursement of 1.31% + $0.00 for card present and 1.87% + $0.00 for card not present transactions to an Interchange rate of 0.00% + $0.00, effectively ending this program for debit transactions.
At the same time, Visa has increased its Credit Voucher Interchange fees that apply to consumer and commercial credit cards by 26 basis points from 2.07% to 2.33% of the dollar amount of the refund.
We’ve discussed how the new legal limit has made credit more favorable than debit for small ticket transactions. Now merchants with liberal return policies may want to analyze whether to consider favoring credit over debit as the lower cost payment option.
As we warned before, most merchant service providers do not refund any Credit Voucher Interchange back to merchant and some even charge an additional discount rate when refunds are processed, so it is important to check your merchant statements carefully.
Try MerchantRates.com for an instant Interchange quote including Credit Voucher Interchange.