Interchange fees

Published: November 29 2009 18:50 | Last updated: November 30 2009 09:28

The way retailers pay banks when customers spend on plastic is peculiar. Fees are split: the processing bank takes some, with the bulk going to the bank that issued the card. The large networks – Visa and MasterCard, which handle almost three-quarters of US card purchases – do not make revenues from so-called interchange directly. They instead charge banks individually negotiated licence and processing fees. But it is the networks that set the interchange fee, typically between 1.5 and 2 per cent of a transaction’s value. 



The article goes on to say that the recent GAO Report supports V/MC and refutes the retailers arguments regarding Interchange.  It also points out that meddling governments should stay out of this fight based on the fact that the last time they stepped in, (Australia) it backfired. (see related articles)



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