Every time a consumer pays for a product or service using a credit card, a fee called an interchange fee—or swipe fee—is charged to the merchant accepting the payment.
Merchant absorbs fee
This fee, usually about 2% of the total transaction, covers payment processing costs for credit card networks Visa and MasterCard. The merchant absorbs the fee, since laws in many states prohibit them from passing it on to the consumer.
However, independent gas station owners represented by the National Association for Convenience and Fuel Retailing (NACS), say that the fees are on the rise. NACS statistics show that there was a 21.6% increase in credit card fees in 2010, and a rise of 23.3% in 2011. This cost convenience stores an estimated $11 billion in profit during 2011, according to NACS. In 2012, that rose even higher to $11.2 billion in fees.
On top of already high gas prices making consumers wary of the fuel pump, gas station owners say that interchange fees cost them another 7 cents per gallon in profits. These two factors combined, say merchants, are crippling their industry.
Different networks charge different fees
MasterCard and Visa have been singled out by NACs because, unlike American Express and Discover, which set interchange rates independently, MasterCard and Visa are governed by an association that also works with member banks and sets fees for all Visa and MasterCard credit cards.
That’s because Discover and American Express operate their own credit card networks and are, in essence, credit card issuer and bank in one. But MasterCard and Visa are payment networks that issue cards for big banks like Chase, Citi, Bank of America and Wells Fargo.
The antitrust lawsuit against MasterCard and Visa has been going on for over seven years and a settlement has still not been accepted by all plaintiffs. The settlement, at $7.25 billion, would be the largest ever antitrust payout. It was offered by MasterCard and Visa in the summer of 2012 and is in the process of being approved.
Meanwhile, gas stations are still paying swipe fees on every credit card transaction, and customers who are used to the convenience of paying at the pump are not likely to start paying cash at the register anytime soon.
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