Visa and Mastercard Swipe Fee increases Delayed a year.

Amid mounting pressure from the Senate and other critics, Visa, Inc and MasterCard, Inc fee increases are delayed a year.

Originally scheduled to go into effect in April 2020, the major card brands delayed interchange rate changes for a year but moved ahead to change the interchange fees next month.

The pending interchange fee changes caught Sen. Dick Durbin and Rep. Peter Welch’s attention, who urged the companies to hold off on 2021 fee increases.

The majority of the interchange increases focused on premium credit cards and online transactions.

The following excerpt from a Bloomberg article reports more on the topic:

Visa Inc. and Mastercard Inc. are postponing plans to boost the fees U.S. merchants pay when consumers use credit cards online, pushing back the changes another year to April 2022 because of the pandemic.

“Visa is committed to maintaining stability in our payments system and will not make any future rate changes in the U.S. for another year while the economy recovers,” the company said in an emailed statement.

Retailers have been asking both networks in recent months to delay hikes in so-called interchange fees, hoping to avoid a jump in costs for accepting cards at a time when consumers are primarily reliant on online shopping. The companies’ plans have drawn attention from Senator Dick Durbin, the Illinois Democrat who previously helped limit fees on debit-card transactions.

As part of its delay, Mastercard said it’s also pushing back plans that would have caused some bricks-and-mortar retailers, along with convenience stores and supermarkets, to see higher rates. The network vowed that it would “continue to be thoughtful” about the timing of implementing the changes.

Take Advantage of this Delay

You may already know this, but I want to let you in on a secret if not. You’re paying interchange and other credit card processing fees so your customers can rack up reward points and airline miles using their premium credit cards. Credit card companies dangle rich perks to get consumers to take their cards. Yet, most people, including your customers, don’t know that you are paying for their perks. Processing companies aren’t just going to give away vacations – someone must pay for those, right? That someone doesn’t have to be you!

Regulations have changed, and it’s not uncommon or illegal to pass credit card processing fees along to the customer.

The fee a merchant can add varies by industry, level of competition, transaction type, geography, and other factors.  Understanding which”user-pays-the-fee” model is suitable for your business requires a little explanation.  The following section will examine the pros and cons of five “user -pays-the-fee” payment models.

Service Fee – Government and Educational Institution Use

Service fees are subject to VISA rule ID #0029275, which spells out how governments and educational institutions can charge credit and debit cardholders a fee on each transaction.  Service fees are either a fixed dollar amount or a percent of the transaction fee for payment of taxes, fines, fees, tuition, etc.

Pros

  • Legal and card brand-compliant way to shift processing costs to cardholders
  • Eliminates processing costs – a no-cost processing solution
  • Can be added to debit and credit card transactions
  • No state restrictions – available nationwide

Cons

  • Only for government and educational institutions
  • Limited to the following merchant classifications or MCCs: 8211; 8220; 8244; 8249; 9211; 9222; 9311; and 9399.

Surcharge Fee

This fee is for credit card transactions only and is typically a percentage of the amount owed by the customer but could be a flat fee.  Merchants can add a surcharge fee equal to their effective rate or a maximum of 4%.  IntelliPay offers a surcharge calculator here to help businesses determine their effective rate. Under the surcharge fee option, the merchant collects the fee and uses the fee to offset their processing costs.

Pros

  • 100% legal and compliant way to shift processing costs to cardholders
  • Eliminates expensive processing costs
  • Improves margins
  • Levels the playing field for cash and debit card paying customers
  • Shifts processing costs to the cardholder who chooses the convenience of paying with a credit card

Cons

  • Limited to credit card transactions only
  • Prohibited on prepaid, gift, and debit card transactions
  • Prohibited in Colorado, Connecticut, Kansas, and Massachusetts
  • Requires processor with experience in fee-based options

Convenience Fee

A convenience fee enables the merchant to charge a flat fee levied for the privilege of paying for a product or service using an alternative payment channel or a payment method that is not standard for the merchant.  Under the convenience fee option, the merchant collects the fee and uses the fee to offset their processing costs. Movie theaters, for example, typically sell tickets face-to-face in the box office. However, if a movie theater gives customers the option of paying by phone or online using a credit card, the theater could charge a “convenience fee.” So technically, the customer is not paying for using their credit card, but for the privilege of using the pay-by-phone or online option.

Pros

  • Card brand compliant
  • Flat fee
  • Can be added to debit and credit card transactions
  • Eliminates merchant fees for payments made through alternative payment channels
  • Improves margins
  • No state restrictions – available nationwide

Cons

  • Convenience fees are added only to payments made through alternative payment channels.
  • Not applicable to all industries or business types

Site Fee

Site Fees are an alternative fee-based option for businesses using the IntelliPay platform.  IntelliPay adds either a percentage or flat fee to a consumer transaction for using their website, software, and technology. Who then uses the site fees to pay for software, maintenance, processing, and customer support, making the site fee option a great margin-saving solution for the merchant. The site fee also removes most PCI compliance onto IntelliPay, eliminating the time and costs associated with annual certification.

Pros

  • Card brand compliant
  • Can be added to credit and debit card transactions
  • Flat rate or percentage
  • Eliminates merchant fees and maintenance of processing accounts and software
  • Takes PCI compliance out of scope for merchants
  • No state restrictions – available nationwide

Cons

  • Two transactions

Which “User-Pays-The-Fee” Option is Right for My Business?

Now is the time to take advantage of this pandemic and congressionally motivated delay and protect margins against future interchange increases with a “user -pays-the-fee” payment option. IntelliPay has been delivering margin-saving user-pays -the-fee options for more than a decade. Our clients range from solo entrepreneurs to large government agencies.  IntelliPay’s expertise can help you customize a solution that is right for your organization.

For a no-obligation evaluation or demo: call 855-872-6632 option three or email sales @intellipay.com.