April Interchange Increases
It happens at least twice each year: the credit card processing companies all send out notices regarding unavoidable pricing increases for their merchants. Like clockwork, April brings the news, usually overlooked by merchants who are used to glancing past the fine print on their monthly statements (if they read them at all). In case you missed it, here is a brief rundown of some current increases in interchange cost associated with the major credit card brands.
Not surprisingly, processing companies use this excuse to cry poor, and in addition to merely passing the additional costs on to merchants, they will mostly tack on across the board increases to compensate for the new expenses while also generating more income.The logic is that they have been taking a loss while keeping their rates low, which may be marginally true, but often times the increases are going to apply to every transaction regardless of card type or use.
Places to watch out for new pricingPlaces to watch out for new pricing are in the transaction fees, additional basis points added to “Interchange Plus” accounts and also increases to the various percentages in tiered pricing accounts. Plus, the network fees associated with the different card types will likely increase.
Here are a few of the recently announced causes for the increases:
Discover is changing the rates associated with its prepaid card program. Even if a merchant does not take many Discover cards to begin with, this affects the overall cost of doing business for the processing companies. This will figure into the overall decision on how much a processor is going to raise its overall fees.
MasterCard is planning some big changes. Traditionally one of the more expensive credit card providers, MasterCard is now considering grouping together its three most costly card types: Corporate, Purchasing and Fleet cards. These will be grouped as the “Large Market” rate structure. More than likely, that will mean putting them all together with the highest rate, or at least raising the lower rates to offset any “savings” in the highest. MasterCard is also launching “MasterCard Commercial Payments,” which is a new virtual product for transactions with no card present. The costs, of course, are being passed along to the merchants, regardless of whether the merchants will encounter this new product.
PIN based debit transaction costs are also expected to rise. In fact, many of the cost savings brought on by the Durbin Amendment now appear to have been gobbled back up by an industry intent on cannibalizing the savings that had been mandated just a few short years ago.
Unfortunately, when paying for the privilege of processing credit cards, there is no getting around the fact that processing companies must offer, and pay for, a wide range of products and services. These offerings are paid for by spreading costs among the widest swath of merchants possible, in order to keep the costs to the merchants low overall. But it is not always fair, especially to the smaller merchants who don’t qualify for the lowest rates or who won’t see a favorable off-set to their monthly fees when they may have otherwise exceptional deals.
If a merchant sees increases that should not apply to the business, or simply do not make sense, it is important to call a sales agent and try to get an understanding of why there was an increase and whether it should apply to the account. Sometimes there may be no better option. Other times, however, a better deal could simply be a phone call away.