Visa is adjusting merchant swipe fees across the board for the first time in a decade. The fees grocers charge will go down, perhaps making it less attractive for banks to bonus grocery spend.
Rates will also be lower for health-care, education and real estate, areas where Visa would like to win market share away from checks. Meanwhile the fee for online (‘card not present’) transactions will go up.
With Visa’s changes, the interchange rate for so-called card-not-present transactions, which include those made online or over the phone, will increase. For a traditional Visa card, the fee on a $100 transaction will climb to $1.99 from $1.90. For premium Visa cards, the fee will rise to $2.60 from $2.50.
On a premium-card transaction of $50 for the category that includes large supermarkets, the interchange fee will drop 33%, to 77 cents from $1.15.
Banks want to bonus small dollar, frequent spend like groceries to get customers in the habit of using their cards, keeping them top of wallet for unbonused spend. The categories where this makes sense to banks though will change based on the revenue associated with each type of transaction.
The changes apply to Visa’s published rate sheet, and individual bank deals with Visa vary. In the extreme Chase pays Visa flat fees for use of its network, so the more transaction volume Chase can do the more money they make.
These interchange fees total over $100 billion a year. New rates will begin in tranches in April and in October. Total Visa acceptance is up 14% year-over-year to 61 million locations worldwide.
(HT: Daniel P.)
Interesting that health-care and real estate fees are being lowered. If premium or AARP or other credit cards would count spending at doctor’s offices, pharmacies, hospitals, etc. as a bonused rewards category, that would be significant, given how much the USA spends on medical care.
Likewise, I would love to be able to pay my mortgage with a Visa or Mastercard (without using an intermediary like Plastiq). Even 0.25% back every month would be sweet.
@Luke Real estate and health care see a fee reduction specifically because Visa wants to see more real estate agents and doctor’s offices accept credit cards. If this is successful, you should expect reduced rewards for those categories to offset the reduced fees.
I think this will have questionable success. These are industries that do not need to take credit cards to drive business, and submit large bills so even a small % fee is a lot of money to give away.
Makes sense. Grocery spend is dominated by large chains that negotiate a lower rate anyway, so I doubt this impacts much. It also makes sense to see no card present swipe fees go up, as there is less competition from cash, and these transactions probably account for the majority of fraud.
If they only invested in the convenience of contactless acceptance, that would be better. Spending in the US is like going back a decade in most other (more) developed countries.