Shopping on line can be easy, simple and save you lots of money. It can also take a lot of your time, frustrate you, and result in unwanted purchases. Now the same can be said for regular high street shopping, but with the vast opportunity presented by the Internet it will pay you to spend a few minutes reading this and understanding how to better optimize your Interchange Fees shopping experience:

1. Compare - without doubt the biggest advantage that the Interchange Fees offers shoppers today is the ability to compare thousands of Interchange Fees at a time. This is a great thing, but not necessarily all the time! Too much can be daunting at times so take advantage of the great comparison sites and where possible let them do the hard work for you.

2. Research - if it has been said it will be on the internet. Ignorance is no longer a justifiable reason for buying the wrong thing. Take the time to research in detail everything that you could possible want to know about

3. Testimonials - don't know anybody that has bought a Interchange Fees? Wrong! If the Interchange Fees is good the internet will let you know. Use the Internet as a friend and get testimonials before you buy.

4. Questions - Got a question about Interchange Fees then search the Forums, FAQ's, Blogs etc. Don't be afraid to ask .....

5. Reputation - Never heard of the company selling Interchange Fees? Don't worry, no reason why you should know every company in the world, but you know someone that does! Use the internet to find out what people are saying about Interchange Fees and build up a picture of their reputation for sales, returns, customer service, delivery etc.

6. Returns - still worried that even after all of the above your Interchange Fees wont be what you want? Check out the returns policy. There is so much competition now that someone, somewhere is bound to offer the terms that you are comfortable with.

7. Feedback - happy with your Interchange Fees then let people know, after all you are depending on others people input in your buying decision, so why not give a little back.

8. Security - check for the yellow padlock on the Interchange Fees site before you buy, and the s after http:/ /i.e. https:// = a secure site

9. Contact - got a question about Interchange Fees, or want to leave a comment then check out the sites contact page. Reputable companies have them and respond.

10. Payment - ready to pay for your Interchange Fees, then use your credit card or PayPal! Be aware of companies that don't accept them, there may be genuine reasons but given the huge amount of choice you have when buying online there is no reason at all not to buy via credit card or PayPal.

Interchange fee is a term used in the payment card industry to describe a fee that bank card networks such as Visa (credit card) and MasterCard require merchants to pay card-issuing banks when merchants accept their credit and debit cards for purchases. The card-issuing bank in a payment transaction deducts the interchange fee from the amount it pays the acquiring bank that handles a credit or debit card transaction for a merchant. The acquiring bank then pays the merchant the amount of the transaction minus both the interchange fee and an additional, smaller fee for the acquiring bank. Interchange fees have a complex pricing structure, which is based on the card brand, the type of credit or debit card, the type and size of the accepting merchant, and the type of transaction (e.g. online, in-store, phone order). Further complicating the rates schedules, interchange fees are typically a flat fee plus a percentage of the total purchase price (including taxes). In the United States, the fee averages approximately 2% of transaction value.

In recent years interchange fees have become a controversial issue, the subject of regulatory and antitrust investigations. Some countries have established significantly lower interchange fees. The fees are also the subject of several ongoing lawsuits in the United States.

Overview report explaining how the interchange fee works.Interchange fees are set collectively by the financial institutions which are stakeholders in Visa (currently an association of banks and other credit card issuers and acquirers) and MasterCard (a public company). Many of these banks issue both credit and debit cards. JPMorgan Chase is the largest issuer of both.

While the credit card market in the United States continues to grow, exceeding $1.3 trillion annually, the number of card-issuing banks has shrunk. The top five credit card issuing banks (JPMorgan Chase, Citigroup, Bank of America, Capital One and HSBC) now control about 90% of all credit card accounts. Card issuers now make over $30 billion annually from interchange fees, an increase of 85% since 2001.

Originally, banks operating under the Visa or MasterCard umbrellas, set interchange fees to maintain balance in the incentive structure between issuing and acquiring banks. Typically, the bulk of the fee goes to the issuing banks. Issuing banks’ interchange fees are extracted from the amount collected by the merchants when they submit credit or debit transactions for payment through their acquiring banks. Interchange fees collected by Visa Visa Interchange Rates and MasterCard MasterCard Interchange Rates totaled $26 billion in 2004. In 2005 the number was $30.7 billion, up 85 percent compared with 2001. Banks who provide credit cards for the very rich usually do not expect to make a significant amount of money from late fees and interest charges, and expect to make their profits on the interchange fee charged to merchants. The World's Most Exclusive Credit Cards Forbes, July 3, 2007.

Interchange rates are established at differing levels for a variety of reasons. For example, a premium credit card that offers rewards generally will have a higher interchange rate than do standard cards. Transactions made with credit cards generally have higher rates than those with signature debit cards, whose rates are in turn typically higher than PIN debit card transactions. Sales that are not conducted in person, such as by phone or on the Internet, generally are subject to higher interchange rates, than are transactions on cards presented in person.

For one example of how interchange functions, imagine a consumer making a $100 purchase with a credit card. For that $100 item, the retailer would get approximately $98. The remaining $2, known as the merchant discount and fees, gets divided up. About $1.75 would go to the card issuing bank (defined as interchange), $0.18 would go to Visa or MasterCard association (defined as assessments), and the remaining $0.07 would go to the retailer's merchant account provider. If a credit card displays a Visa logo, Visa will get the $0.18, likewise with MasterCard. Visa's assessment is fixed at 0.0925% of the transaction value and MasterCard's assessment is fixed at 0.0950% of the transaction value. On average the interchange rates in the US are 179 bps (1.79%) and vary widely across countries; in April 2007 Visa announced it would raise its rate .6% to1.77%. Visa Hikes Overall Interchange 0.6%, Effective April 14 Digital Transactions, April 12, 2007. Retrieved May 22, 2007.

According to a January 2007 poll by Harris Interactive, 32% of the public had heard of the interchange fee; once explained to them, 91% said Congress "should compel credit card companies to better inform consumers" about the fee. Card issuers, retailers at odds Los Angeles Times, April 2, 2007. Retrieved May 22, 2007.

Controversy Regulators in several countries have questioned the collective determination of interchange rates and fees as potential examples of price-fixing. Merchant groups in particular, including the U.S.-based Merchants Payments Coalition and Merchant Bill of Rights, also claim that interchange fees are much higher than necessary, Merchants, pay attention to rising credit-card fees Indianapolis Star, May 22, 2007. Retrieved May 22, 2007. pointing to the fact that even though US technology and efficiency has improved, interchange fees have more than doubled in the last 10 years. Issuing banks argue that reduced interchange fees would result in increased costs for cardholders, and reduce their ability to satisfy rewards on cards already issued.

Merchant lawsuits claim that interchange fees in the U.S. are out of line with falling technology costs and similar fees charged outside the United States, resulting in higher prices, lower profits and harm to the consumer. The lawsuits allege that these high fees represent collusion and price fixing among the bank card networks and their card issuing banks, in violation of antitrust laws. Bank card networks disagree, claiming interchange fees represent an effort to balance incentives to issuing banks to issue more cards with better rewards against the need to bring an optimum number of card-accepting merchants into their credit card systems. They also claim that the interchange fees bring consumer benefits such as more rewards, reduced fraud, lower interest rates and system innovations.

Senate hearings in the United States have focused on the secrecy surrounding interchange fee schedules and card operating rules. In 2006 Visa and MasterCard both released some fee schedules and summary reports of their card rules, though pressure continues for them to release the full documents. In January 2007, Senate Banking committee chairman Chris Dodd cited interchange fees at a hearing on credit card industry practices and again in March the fees were criticized by Sen. Norm Coleman Sen. Coleman statement, Senate.gov, March 7, 2007. Retrieved May 22, 2007.. In January 2007, Microsoft chairman Bill Gates cited high interchange fees as a significant reason Microsoft believes it can be competitive in online micropayments.

In March 2007, MasterCard announced it was changing its rate structure, splitting the lower, "basic" tier for credit cards into two new tiers. The Wall Street Journal reported MasterCard Alters Fee Structure, Wall Street Journal, March 1, 2007. Retrieved May 22, 2007. that the document outlining the shift "makes it difficult to determine if the new rates, on average, are rising." MasterCard spokesman Joshua Peirez said the new structure "allows us to have a more sophisticated way to break up our credit card portfolio," while National Retail Federation general counsel Mallory Duncan said, "They are pricing each tier at the absolute most they can so they can maximize their income."

On July 19, 2007 the House Judiciary Committee antitrust task force held the first hearing to study the specific issue of interchange fees. NRF's Duncan testified, as did representatives from the credit card industry. Subcommittee chairman John Conyers, leading the panel, said, "While I come into the hearing with an open mind, I do believe the burden of the proof lies with the credit card companies to reassure Congress that increasing interchange fees are not harming merchants and ultimately consumers." U.S. lawmaker wants proof credit card fees don't harm Reuters, July 19, 2007. Retrieved July 20, 2007.

Outside the United States In 2003, the [Reserve Bank of Australia required that interchange fees be dramatically reduced, from about 0.95% of the transaction to approximately 0.5%. One notable result has been the reduced use of [Loyalty program and increased use of debit cards. Australia also removed the "no surcharge" rule, which prevented merchants from charging a credit card fee, has also made changes to the interchange rates on debit cards and has considered abolishing interchange fees altogether.

As of November 2006, New Zealand is considering similar actions, following a State sector organisations in New Zealand#Crown Entities lawsuit alleging price-fixing by Visa and MasterCard. In New Zealand, merchants pay a 1.8% fee on every credit card transaction.

The European Commission has pressured Visa to reduce cross-border interchange fees, and in the United Kingdom, MasterCard has reduced its interchange fees while it is under investigation by the Office of Fair Trading. In January 2007, the European Union's [Directorate-General for Competition (European Commission) issued the results of a two-year study of Interchange fees. Upon publishing the report, Commissioner [Neelie Kroes said the "present level of interchange fees in many of the schemes we have examined does not seem justified." The report called for further study of the issue.

External links

• Merchants Payments Coalition
• Merchant Bill of Rights

Notes

Interchange fee is a term used in the payment card industry to describe a fee that bank card networks such as Visa (credit card) and MasterCard require merchants to pay card-issuing banks when merchants accept their credit and debit cards for purchases. The card-issuing bank in a payment transaction deducts the interchange fee from the amount it pays the acquiring bank that handles a credit or debit card transaction for a merchant. The acquiring bank then pays the merchant the amount of the transaction minus both the interchange fee and an additional, smaller fee for the acquiring bank. Interchange fees have a complex pricing structure, which is based on the card brand, the type of credit or debit card, the type and size of the accepting merchant, and the type of transaction (e.g. online, in-store, phone order). Further complicating the rates schedules, interchange fees are typically a flat fee plus a percentage of the total purchase price (including taxes). In the United States, the fee averages approximately 2% of transaction value.

In recent years interchange fees have become a controversial issue, the subject of regulatory and antitrust investigations. Some countries have established significantly lower interchange fees. The fees are also the subject of several ongoing lawsuits in the United States.

Overview report explaining how the interchange fee works.Interchange fees are set collectively by the financial institutions which are stakeholders in Visa (currently an association of banks and other credit card issuers and acquirers) and MasterCard (a public company). Many of these banks issue both credit and debit cards. JPMorgan Chase is the largest issuer of both.

While the credit card market in the United States continues to grow, exceeding $1.3 trillion annually, the number of card-issuing banks has shrunk. The top five credit card issuing banks (JPMorgan Chase, Citigroup, Bank of America, Capital One and HSBC) now control about 90% of all credit card accounts. Card issuers now make over $30 billion annually from interchange fees, an increase of 85% since 2001.

Originally, banks operating under the Visa or MasterCard umbrellas, set interchange fees to maintain balance in the incentive structure between issuing and acquiring banks. Typically, the bulk of the fee goes to the issuing banks. Issuing banks’ interchange fees are extracted from the amount collected by the merchants when they submit credit or debit transactions for payment through their acquiring banks. Interchange fees collected by Visa Visa Interchange Rates and MasterCard MasterCard Interchange Rates totaled $26 billion in 2004. In 2005 the number was $30.7 billion, up 85 percent compared with 2001. Banks who provide credit cards for the very rich usually do not expect to make a significant amount of money from late fees and interest charges, and expect to make their profits on the interchange fee charged to merchants. The World's Most Exclusive Credit Cards Forbes, July 3, 2007.

Interchange rates are established at differing levels for a variety of reasons. For example, a premium credit card that offers rewards generally will have a higher interchange rate than do standard cards. Transactions made with credit cards generally have higher rates than those with signature debit cards, whose rates are in turn typically higher than PIN debit card transactions. Sales that are not conducted in person, such as by phone or on the Internet, generally are subject to higher interchange rates, than are transactions on cards presented in person.

For one example of how interchange functions, imagine a consumer making a $100 purchase with a credit card. For that $100 item, the retailer would get approximately $98. The remaining $2, known as the merchant discount and fees, gets divided up. About $1.75 would go to the card issuing bank (defined as interchange), $0.18 would go to Visa or MasterCard association (defined as assessments), and the remaining $0.07 would go to the retailer's merchant account provider. If a credit card displays a Visa logo, Visa will get the $0.18, likewise with MasterCard. Visa's assessment is fixed at 0.0925% of the transaction value and MasterCard's assessment is fixed at 0.0950% of the transaction value. On average the interchange rates in the US are 179 bps (1.79%) and vary widely across countries; in April 2007 Visa announced it would raise its rate .6% to1.77%. Visa Hikes Overall Interchange 0.6%, Effective April 14 Digital Transactions, April 12, 2007. Retrieved May 22, 2007.

According to a January 2007 poll by Harris Interactive, 32% of the public had heard of the interchange fee; once explained to them, 91% said Congress "should compel credit card companies to better inform consumers" about the fee. Card issuers, retailers at odds Los Angeles Times, April 2, 2007. Retrieved May 22, 2007.

Controversy Regulators in several countries have questioned the collective determination of interchange rates and fees as potential examples of price-fixing. Merchant groups in particular, including the U.S.-based Merchants Payments Coalition and Merchant Bill of Rights, also claim that interchange fees are much higher than necessary, Merchants, pay attention to rising credit-card fees Indianapolis Star, May 22, 2007. Retrieved May 22, 2007. pointing to the fact that even though US technology and efficiency has improved, interchange fees have more than doubled in the last 10 years. Issuing banks argue that reduced interchange fees would result in increased costs for cardholders, and reduce their ability to satisfy rewards on cards already issued.

Merchant lawsuits claim that interchange fees in the U.S. are out of line with falling technology costs and similar fees charged outside the United States, resulting in higher prices, lower profits and harm to the consumer. The lawsuits allege that these high fees represent collusion and price fixing among the bank card networks and their card issuing banks, in violation of antitrust laws. Bank card networks disagree, claiming interchange fees represent an effort to balance incentives to issuing banks to issue more cards with better rewards against the need to bring an optimum number of card-accepting merchants into their credit card systems. They also claim that the interchange fees bring consumer benefits such as more rewards, reduced fraud, lower interest rates and system innovations.

Senate hearings in the United States have focused on the secrecy surrounding interchange fee schedules and card operating rules. In 2006 Visa and MasterCard both released some fee schedules and summary reports of their card rules, though pressure continues for them to release the full documents. In January 2007, Senate Banking committee chairman Chris Dodd cited interchange fees at a hearing on credit card industry practices and again in March the fees were criticized by Sen. Norm Coleman Sen. Coleman statement, Senate.gov, March 7, 2007. Retrieved May 22, 2007.. In January 2007, Microsoft chairman Bill Gates cited high interchange fees as a significant reason Microsoft believes it can be competitive in online micropayments.

In March 2007, MasterCard announced it was changing its rate structure, splitting the lower, "basic" tier for credit cards into two new tiers. The Wall Street Journal reported MasterCard Alters Fee Structure, Wall Street Journal, March 1, 2007. Retrieved May 22, 2007. that the document outlining the shift "makes it difficult to determine if the new rates, on average, are rising." MasterCard spokesman Joshua Peirez said the new structure "allows us to have a more sophisticated way to break up our credit card portfolio," while National Retail Federation general counsel Mallory Duncan said, "They are pricing each tier at the absolute most they can so they can maximize their income."

On July 19, 2007 the House Judiciary Committee antitrust task force held the first hearing to study the specific issue of interchange fees. NRF's Duncan testified, as did representatives from the credit card industry. Subcommittee chairman John Conyers, leading the panel, said, "While I come into the hearing with an open mind, I do believe the burden of the proof lies with the credit card companies to reassure Congress that increasing interchange fees are not harming merchants and ultimately consumers." U.S. lawmaker wants proof credit card fees don't harm Reuters, July 19, 2007. Retrieved July 20, 2007.

Outside the United States In 2003, the [Reserve Bank of Australia required that interchange fees be dramatically reduced, from about 0.95% of the transaction to approximately 0.5%. One notable result has been the reduced use of [Loyalty program and increased use of debit cards. Australia also removed the "no surcharge" rule, which prevented merchants from charging a credit card fee, has also made changes to the interchange rates on debit cards and has considered abolishing interchange fees altogether.

As of November 2006, New Zealand is considering similar actions, following a State sector organisations in New Zealand#Crown Entities lawsuit alleging price-fixing by Visa and MasterCard. In New Zealand, merchants pay a 1.8% fee on every credit card transaction.

The European Commission has pressured Visa to reduce cross-border interchange fees, and in the United Kingdom, MasterCard has reduced its interchange fees while it is under investigation by the Office of Fair Trading. In January 2007, the European Union's [Directorate-General for Competition (European Commission) issued the results of a two-year study of Interchange fees. Upon publishing the report, Commissioner [Neelie Kroes said the "present level of interchange fees in many of the schemes we have examined does not seem justified." The report called for further study of the issue.

External links

• Merchants Payments Coalition
• Merchant Bill of Rights

Notes