NRF Says Interchange Fees Cost Families Over $400 This Year

“If consumers knew how much they are actually paying for credit cards, most would say they aren’t worth the price,” NRF Senior Vice President and General Counsel Mallory Duncan said. “U.S. consumers are paying an outrageously high annual fee that most don’t even know about, and the price is going up dramatically every year.”

“There is no transparency and no negotiation under the current system,” Duncan said. “This legislation would bring about true competition among the banks that issue credit cards, giving retailers the opportunity to negotiate terms on behalf of themselves and their customers that reflect the actual cost of the services provided.”

According to NRF estimates, the average U.S. family is projected to pay $427 in hidden credit card interchange fees in 2008. The figure is based on the $48 billion Visa, MasterCard and their banks are projected to collect in interchange during 2008 divided by the U.S. Census Bureau’s estimate of 112.4 million households. The number is up from $378 in 2007, and has nearly tripled from the $159 paid in 2001, the year NRF began tracking interchange.

Averaging close to 2 percent, interchange is a non-negotiable fee Visa and MasterCard banks charge merchants every time a credit card or signature debit card is used to pay for a transaction. Visa and MasterCard collected an estimated $42 billion in interchange fees in 2007, and the amount is increasing at an average of close to 17 percent per year. Visa and MasterCard effectively force merchants to pass the fees on to consumers by requiring them to be included in the advertised price of items and making cash discounts difficult. But interchange is largely unknown to most consumers because Visa and MasterCard keep merchants from disclosing it on receipts and don’t disclose the fee on monthly statements.

A 2006 report by Chicago’s Diamond Management and Technology Consultants Inc. found that only 13 percent of the interchange fee is needed for actual transaction processing costs, with most of the rest going to the cost of card issuers’ rewards programs and profits.