The local establishments and retailers want congress to entail the costs that are associated with allowing for the use of credit and debit cards that take a big bite of their profits. These fees, commonly known as swipe fees, are said to hurt these small establishments.
The swipe fees were put in place to provide for the cost of electronic processing of the payments and are usually in the range of 1% to 3% of the transaction amount. However, these fees have ended up becoming one of the biggest cash cows for the banks, giving them annually over $48 billion in profit.
Hence, merchants are asking for some action of this particular profit area for the banks. Many businesses find the swipe fees to be complex and frustrating in order to keep track of. There are some credit card companies like Visa and MasterCard that charge over 250 different kinds of rates, which is dependent on the card and the kind of transaction it has been used for.
Compare to how things were less than 20 years back, when Visa had only 4 standard rates, you will understand the problem areas. Today, Visa has over 60 different rates and MasterCard has a whopping 243 different kinds of rates, all of which need not be applicable for the merchants. Even the percentage amount has not been spared, and the percentage for Visa today is 2.95% and that of MasterCard is 3.95%, both of which are a full percent more than what they used to less than 2 decades ago.
In the world of the merchant, he is usually not allowed to see the rate structure put in place by the credit card companies. In fact, all that merchants can do is to research and search for deals between the different processors to handle the transactions on their behalf. Another rising issue is the fees charged by banks to one another in order to handle electronic payments as well as the mark up processors tack on for the generation of revenue. Another thing to check is to see if it is possible for the credit card issues to limit the amount merchants can pay.
Visa and MasterCard together account for over 71% of all the US credit transactions, and according to the recent Government Accountability Office report, the sharp rise in these swipe fees have significantly dented the costs of the merchants.
Additional options for bringing down the swipe fees can be difficult, especially with the fact that American Express as well as Discover take up 24% and 5% of all credit transactions, respectively.