Visa and MasterCard, the world’s biggest payments networks, may face a merchant backlash by raising debit-card swipe fees on the smallest purchases to the maximum allowed under rules that take effect Oct 1.
MasterCard will impose the highest fees allowed on all debit transactions, including so-called small-ticket purchases, for cards issued by the biggest U.S. banks, said a person with direct knowledge of the matter. Visa will do the same, Thomas McCrohan, an analyst at Janney Montgomery Scott, wrote in a Sept. 21 note, without saying how he got the information.
The networks, which pass the fees to lenders such as JPMorgan Chase and Citigroup, now charge retailers 1.55 percent of the purchase price plus 4 cents for small-ticket transactions of less than $15. That comes to about 7 cents for a $2 cup of coffee. The cost to merchants for that item would more than triple under rules created by the Federal Reserve, which capped the fees at 21 cents, plus 5 basis points of the total and a conditional 1 cent for fraud-prevention.
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“The mom-and-pop coffee shop that processes lots of $3 transactions is really going to get hurt by this,” said Brian Dodge, a spokesman for the Retail Industry Leaders Association, a trade group that represents the biggest U.S. merchants, including Wal-Mart Stores, Target and Home Depot.
The new fee structure won’t apply to cards issued by banks and credit unions with less than $10 billion in assets, which are exempt from the law, a provision of the Dodd-Frank Act.