Fernald Business Association

The interchange rate refers to the percentage amount of each card based transaction that a retailer must pay for the right to accept a specific payment card brand. The interchange rate is tiered, with rates for standard cards ranging from 1.6% to 1.9% of each transaction and rates for premium cards significantly higher at 2.3% to 2.5%. It is the influx of these new premium cards that has increased the average monthly cost of credit card processing by 10% to 20% for many retailers.

According to a study by investment firm Morgan Stanley, interchange costs in the United States will reach $32.4 billion by 2010. Merchants around the world have complained of their inability to negotiate these rates and in several geographies including Canada and the United States they have taken their concerns to the government in an appeal for increased regulation of the entire payment card industry.

In response to merchant concerns Visa and MasterCard have pointed to the wide variety of payment options available to consumers and stressed the fact that accepting payment cards is a business decision, not a requirement. Merchants argue that payment cards have become an industry standard to the point where they must accept multiple payment card brands or risk losing business.

Merchants that choose to accept payment cards are bound by a card acceptance contract which mandates that any merchant who wishes to accept a specific credit card brand must accept all cards issued by that brand. The card acceptance contract also forbids merchants from setting minimum dollar amounts for payment card transactions or imposing surcharges on certain types of cards. In effect merchants are paying more for card processing, with no added value and there is absolutely nothing they can do about it.