Walmart, Target, and Kroger are dealing with two bills in Congress for lower credit card fees. These retailers made an effort in lowering the swipe fee for credit cards. As this swipe fee is very high in the USA.

“Swipe fees for credit cards are much higher in the USA than any country in the world – almost seven times higher than in Europe as this increases inflation”, says a business union to lawmakers last week.

Nowadays everyone prefers using credit cards as it is more convenient to use than cash. Retailers who accept credit card payments have to pay a specific fee for every transaction, known as the Payment processing fee.

Swipe fees are also known as interchange fees. Retailers have to make this payment every time a customer makes a credit card purchase. This effort of pushing the credit card fee low is by Target, Walmart, and Kroger.

Understanding Swipe Fees

The swipe fee covers the processing cost of credit card payments. However, for years many merchants have blind trust in payment processors having agreements of no verified data. The swipe fees are what merchants have to charge every time a customer uses his credit card. For in-person swipes the average fee is almost 2% however, online rates may be up to 2.5%. You go outside and swipe your card in the machine at that point a merchant is charged swipe or interchange fees. Each transaction’s average fee is about 1.95% – 2.0% for Visa and Mastercard. For transactions that do not involve a physical card like online purchases the rate increases around 2.3% – 2.5%.

The rates of American Express are not public, but it is very high. This fee may look very high but payment processing companies like Mastercard or Visa argue when you chip or swipe a credit card, then the merchant pays for this immediately, but it will probably be a minimum of 30 days and maybe longer before the companies receive your payment.

For One Purpose Walmart and Target Working Together

There is an application of swipe fees on credit cards through a complex system. Its charges vary by merchant, card type, transaction size, or banking institution. According to a report from a publication covering the payment industry ” Last year merchants paid around $138 billion for processing fees”. This processing fee is between 1% and 3% of the total transaction. Stores often pass this fee at higher prices to their customers.

According to a survey “Mastercard and Visa are the most used credit cards in the USA. It has up to 80% share in credit card share”. This year in July legislation introduce the route of various payments in alternate networks that are not run by Mastercard and Visa. This week a similar initiative proposes. Many experts thought that it would create massive competition in the credit card network market. Through this act, Mastercard and Visa may lose their hold over the industry.    

“Swipe fees may increase the gas and groceries prices,” says Darbin. He added further “If we put the true competition to credit card networking it will minimize the swipe fee and also decrease the costs for merchants and customers”.

“These swipe fees are very helpful in banking services and fund rewards programs; however, minimizing the risks for merchants by ensuring payment methods” according to Mastercard and Visa.

What They Say

According to credit card companies “These credit card legislations will not minimize prices, but it may lead to unbearable results like less credit card access, fewer rewards, and less security”.

According to a spokesperson for the Credit Union National Association, “Some under-banked credit card unions have some issues that this legislation would affect customer’s rights”. In addition, there are some concerns that credit cards may get less attainable and more expensive for many customers.

According to Wall Street Journal reports, “Federal Reserves requires for new legislation to issuing large bank credit cards and makes them enable one network that is not Mastercard or Visa-affiliated”. However, banks that issue Mastercard and Visa with total assets of around $100 billion may get affected by these legislations.

The main issue for retailers is that credit card companies have the upper hand in charging them. You have to encounter a “Swipe fee” every time you use a card. A bipartisan bill is in progress that may change these dynamics. The next time you use your credit card you should know you are dealing with a big battle. This battle is between the place where you’re shopping and the credit card companies, especially Mastercard and Visa.

It seems that big changes are coming to the way credit cards work. Every time you use your credit card your money travels underground. Actually, in this financial plumbing system, the store has to pay a fee that you probably don’t know.