U.S. PIRG Consumer Blog: VISA responds to attacks, caps merchant fee on gasoline

In a sign that it is desperate to block proposed House and Senate regulation of the anti-competitive credit and debit card interchange fees it imposes on merchants that accept plastic, VISA yesterday announced (release and a story) it is capping debit interchange at 95 cents and making other changes to lower credit interchange. As was first pointed out several years ago by the Washington Post, when gas prices skyrocket, interchange revenue for banks skyrockets, even though the banks did nothing useful. Interchange is highest on so-called rewards cards, where it can run well-over 2% on credit and perhaps even some debit rewards cards, so lowering interchange on gas is a calculated effort to defuse strong Congressional opposition to the fees. And of course, neither Visa nor Mastercard have successfully explained how it is that I swipe a classic card, the interchange fee the merchant pays is about 1%, but if I swipe a rewards card, it can be up to 2.5% or more.

Of course, for average customers, savings to merchants on interchange are modest, as even VISA admits--

"under the new rates, if a motorist uses a Visa Signature credit card to fill a 15-gallon tank at $4 a gallon -- or $60 total -- the acquiring institution generally would pay $0.94 in interchange fees, a savings of 14 percent over current rates"...

Percentage savings to merchants increase for larger purchases for SUVs and trucks.

Visa is also concerned that Chairman John Conyers (D-MI) of the House Judiciary Committee is no longer the only senior member of Congress with a reform bill. Senate Majority Whip Dick Durbin (D-IL) has filed strong anti-interchange proposal (his release and bill, S. 3086). These are formidable champions for the merchants. Durbin's co-sponsor is Kit Bond (R-MO), a very senior Republican, and while Conyers' lead Republican, Chris Cannon, (R-UT) lost a primary this week, their bill still enjoys bi-partisan support and Cannon, of course, is still here, until November.

Our most recent testimony on why all consumers, whether they pay with cash or plastic, pay more at the store and more at the pump is here.