6 ms·

American merchants are paying 0.05%+$0.22 for debit and check cards, and the only credit cards where interchange is 2-3% are those that pay 1-2% in cash back or

American merchants are paying 0.05%+$0.22 for debit and check cards, and the only credit cards where interchange is 2-3% are those that pay 1-2% in cash back or reward points/miles. Non-reward credit cards and gift cards start at 0.65% in interchange fees otherwise.

objclxt 10y ago
> the only credit cards where interchange is 2-3% are those that pay 1-2% in cash back or reward points/miles. Non-reward credit cards and gift cards start at 0.65% in interchange fees otherwise. Those differences in credit card fees between rewards and non-rewards often aren't being passed on to the merchant, though, especially small businesses who have little room to negotiate.
- dangrossman 10y ago
  I'm a small business merchant, and they're passed on to me. I pay interchange plus 0.04%. If interchange on a specific transaction is 0.05% then I pay 0.09%. If it's 2.9% then I pay 2.94%. Merchant service providers have been pushing this "interchange-plus" pricing model to win over businesses from other providers with the old "tiered rates" pricing for many years now. Even "tiered rates" did pass on some of the price differences, just not as directly. PayPal/Stripe's model of a single flat fee for all card types is pretty much exclusively an internet (card-not-present) thing, except for the rare coffee shop with one of those Square smartphone dongles. None of the B&M stores you shop in are likely paying flat rates. Different cards cost them different amounts of money.
  - watchdogtimer 10y ago
    Who's your merchant services provider?
  - bung 10y ago
    I wonder if he meant "passed on _by_ the merchant", as in, it's not like any business will give non-rewards-card-payers a discount.
dlubarov 10y ago
That's oversimplifying a lot. All of Visa's current interchange rates are listed here: https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-interchange-reimbursement-fees-2016-april.pdf https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-in... (of course the other networks have their own rates) But that's just interchange (the amount paid to the issuer); merchants also pay a network fee and usually additional fees to their acquirer.
- dangrossman 10y ago
  Not a lot, just a little. Pages 1-2 are just title pages. Page 3-6 every row shows 0.05%+$0.22, because those are all types of debit cards. Page 7-8 are the ones that apply to swiping a credit card, and only 3 of those rows account for what we're talking about here: retail/supermarket/restaurant. In those rows, we have 4 columns that correspond to how many rewards the cards pay back to the consumer. They max out at 2.4% for any brand's variety of Visa Signature Preferred card, which pay up to 2% cash back.
  - deleted 10y ago
    [deleted]
tonyhb 10y ago
Yep. This low debit fee is due to the durbin amendment (https://en.wikipedia.org/wiki/Durbin_amendment https://en.wikipedia.org/wiki/Durbin_amendment), which is generally how Stripe makes most of its money AFAIK. Stripe still charges the % and takes the remainder.
mysterypie 10y ago
> the only credit cards where interchange is 2-3% are those that pay 1-2% in cash back or reward points/miles What percentage of credit cards in the U.S. and Canada pay 1-2% in cash back or have reward points/miles? If the answer is most credit cards, then it seems to follow that merchants are being charged 2-3% for most transactions. Or am I missing something here? Furthermore, I don't believe that merchants are allowed to pick and choose which credit cards they'll accept based on the fees. That is, if a merchant says that they take Mastercard, they have to take any brand of Mastercard. They can't refuse a Mastercard that gives cash back (and how could they even tell at the time of the transaction anyway?).
- gtk40 10y ago
  There are different types of card that have different fees, like Visa Signature or MasterCard World. These usually have rewards. However, it seems like most credit cards I've seen (at least in the tier I've considered) have 1% CB or equivalent at the least, even without being Signature or World.
- krrrh 10y ago
  There were class action lawsuits in both Canada and the US over the anti-competitive nature of the agreements merchants had to enter into. I can't remember all the details, but in the US merchants rights to charge consumers higher prices or fees for using rewards cards was confirmed. But I've never seen a merchant actually doing this online.
  - MaulingMonkey 10y ago
    I believe either VISA or MasterCard - likely both - have rules against charging any additional fees when paying with their cards as a merchant, with the implicit threat of them pulling their services and leaving you unable to process cards if you don't follow said rules. The typical workaround, which isn't against their rules, is to offer a discount for paying in cash - I can't recall the last gas station I saw that didn't do this (for gas at least), and a number of restaurants also offer cash discounts.
abalone 10y ago
Small correction: visa/mc interchange is 1.2-2.4% + 5-10 cents.[1] And that's what banks get to work with in terms of paying out rewards. It's processors that mark up the rates higher... And that can increase what merchants pay for debit as well. The biggest merchant ripoff going on right now are processors that charge the same rate for debit and credit. If more merchants knew how cheap debit can be there might be more steering. [1] https://usa.visa.com/dam/VCOM/download/merchants/Visa-USA-Interchange-Reimbursement-Fees-2015-April-18.pdf https://usa.visa.com/dam/VCOM/download/merchants/Visa-USA-In...

objclxt 10y ago

> the only credit cards where interchange is 2-3% are those that pay 1-2% in cash back or reward points/miles. Non-reward credit cards and gift cards start at 0.65% in interchange fees otherwise. Those differences in credit card fees between rewards and non-rewards often aren't being passed on to the merchant, though, especially small businesses who have little room to negotiate.

dangrossman 10y ago
I'm a small business merchant, and they're passed on to me. I pay interchange plus 0.04%. If interchange on a specific transaction is 0.05% then I pay 0.09%. If it's 2.9% then I pay 2.94%. Merchant service providers have been pushing this "interchange-plus" pricing model to win over businesses from other providers with the old "tiered rates" pricing for many years now. Even "tiered rates" did pass on some of the price differences, just not as directly. PayPal/Stripe's model of a single flat fee for all card types is pretty much exclusively an internet (card-not-present) thing, except for the rare coffee shop with one of those Square smartphone dongles. None of the B&M stores you shop in are likely paying flat rates. Different cards cost them different amounts of money.
- watchdogtimer 10y ago
  Who's your merchant services provider?
- bung 10y ago
  I wonder if he meant "passed on _by_ the merchant", as in, it's not like any business will give non-rewards-card-payers a discount.

dlubarov 10y ago

That's oversimplifying a lot. All of Visa's current interchange rates are listed here: https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-interchange-reimbursement-fees-2016-april.pdf https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-in... (of course the other networks have their own rates) But that's just interchange (the amount paid to the issuer); merchants also pay a network fee and usually additional fees to their acquirer.

dangrossman 10y ago
Not a lot, just a little. Pages 1-2 are just title pages. Page 3-6 every row shows 0.05%+$0.22, because those are all types of debit cards. Page 7-8 are the ones that apply to swiping a credit card, and only 3 of those rows account for what we're talking about here: retail/supermarket/restaurant. In those rows, we have 4 columns that correspond to how many rewards the cards pay back to the consumer. They max out at 2.4% for any brand's variety of Visa Signature Preferred card, which pay up to 2% cash back.
- deleted 10y ago
  [deleted]

tonyhb 10y ago

Yep. This low debit fee is due to the durbin amendment (https://en.wikipedia.org/wiki/Durbin_amendment https://en.wikipedia.org/wiki/Durbin_amendment), which is generally how Stripe makes most of its money AFAIK. Stripe still charges the % and takes the remainder.

mysterypie 10y ago

> the only credit cards where interchange is 2-3% are those that pay 1-2% in cash back or reward points/miles What percentage of credit cards in the U.S. and Canada pay 1-2% in cash back or have reward points/miles? If the answer is most credit cards, then it seems to follow that merchants are being charged 2-3% for most transactions. Or am I missing something here? Furthermore, I don't believe that merchants are allowed to pick and choose which credit cards they'll accept based on the fees. That is, if a merchant says that they take Mastercard, they have to take any brand of Mastercard. They can't refuse a Mastercard that gives cash back (and how could they even tell at the time of the transaction anyway?).

gtk40 10y ago
There are different types of card that have different fees, like Visa Signature or MasterCard World. These usually have rewards. However, it seems like most credit cards I've seen (at least in the tier I've considered) have 1% CB or equivalent at the least, even without being Signature or World.
krrrh 10y ago
There were class action lawsuits in both Canada and the US over the anti-competitive nature of the agreements merchants had to enter into. I can't remember all the details, but in the US merchants rights to charge consumers higher prices or fees for using rewards cards was confirmed. But I've never seen a merchant actually doing this online.
- MaulingMonkey 10y ago
  I believe either VISA or MasterCard - likely both - have rules against charging any additional fees when paying with their cards as a merchant, with the implicit threat of them pulling their services and leaving you unable to process cards if you don't follow said rules. The typical workaround, which isn't against their rules, is to offer a discount for paying in cash - I can't recall the last gas station I saw that didn't do this (for gas at least), and a number of restaurants also offer cash discounts.

abalone 10y ago

Small correction: visa/mc interchange is 1.2-2.4% + 5-10 cents.[1] And that's what banks get to work with in terms of paying out rewards. It's processors that mark up the rates higher... And that can increase what merchants pay for debit as well. The biggest merchant ripoff going on right now are processors that charge the same rate for debit and credit. If more merchants knew how cheap debit can be there might be more steering. [1] https://usa.visa.com/dam/VCOM/download/merchants/Visa-USA-Interchange-Reimbursement-Fees-2015-April-18.pdf https://usa.visa.com/dam/VCOM/download/merchants/Visa-USA-In...