In July, new legislation is designed to lower the interchange fees charged for card transactions to 12 cents. Banks and some legislators are attempting to slow the implementation of this new law, worried that it will hurt enterprise competitiveness. These limits, however, are precisely what could save smaller businesses. Source of article - A small business perspective on payment systems by MoneyBlogNewz.

Interchange fee primer

Card interchange fees are, in short, fees paid for the privilege of allowing customers to use a credit or debit card. These are called "swipe fees," also. They cost between 12 and 75 cents every time somebody uses the card. This "interchange fee" is in addition to a certain percentage of the transaction amount that is charged for use of the card. The business that provides the card machine, the financial institution doing the transaction and the card processor are all the things the interchange and percentage fees pay. A lot of money builds up with the fees. It added up to $50 billion in 2010. The U.S. interchange fees are twice and much as Europe’s interchanges fees. To be able to help United States businesses become less competitive, congress members try to push some legislation. This would make interchange fees go down.


Adding interchange fees can mean less business


Taking credit cards can hurt a business. Still, the small businesses have to make the decision on whether or not to take it. Credit card processors typically charge a monthly fee while a fee and percentage of every credit card transaction also has to be paid typically with credit cards. Some businesses don’t have lots of additional money. It's worse for these corporations. Even with accessible alternatives that reduce cost, any small business could have to eventually pass on the cost to consumers through minimum purchases, higher prices or additional charges on card payments. Consumers are going to make bigger purchases when there are credit cards while more individuals are willing to use your shop.


My small business perspective


I offer many services at a small business I own with my husband. Whether we should accept credit cards were never really a question -- it was a necessity. Without a physical location and relatively low monthly sales volume, the $20 to $100 monthly fee of a traditional charge card terminal simply didn't make sense. Start-up Square was used for our credit cards processing credit cards through smartphones and charging a flat percentage of every transaction. Sales are only at $300 a month. We only pay about $8 in charge card fees each month. Added on to $30 in company taxes and $26 in sales tax we collect, the amount accessible to pay our suppliers and make a profit gets thinner. Charge card interchange fees going down would help us a lot. We could hire employees and charge less. Either way, card fees may not sound like much to a consumer, however those few percentage points are what can take a small business from "surviving" to "competitive."



Information from


Market Watch

marketwatch.com/story/visa-mastercard-rise-on-swipe-fee-regulation-pact-2010-06-21