Credit card interchange fees

At least one group is concerned with the rising credit card fees, in this case a website called Unfair Credit Card Fees. The site focuses on a lesser known fee that is charged every time you swipe your plastic: the interchange fee.

Most people, I think (though the group disagrees) know that the card companies get a cut of the transaction every time you swipe your card. Honestly, until I had researched the subject I always thought it was a set dollar amount to cover the cost of handling the transaction, or a monthly service charge for the equipment. For example every time you swipe your card, the merchant would get charged $0.50 or something. This made sense to me because often small independents would refuse electronic transactions under $5.00. Obviously if they are getting charged a fixed amount, they want to minimize the percentage of the fee compared to the purchase price. Not so. It is in a fact a % of the total sale, roughly an average of 2%. According to other sources, cards like Discover and AMEX charge even more, which would explain why many merchants outright refuse them.

This confuses me a bit as to why merchants refuse transactions under $5, unless there is also a minimum to this fee? Ie, 2% of the charge or $3.00, whichever is greater. the site doesn't say, but it does have some interesting information as well as some resources if you want to be active in fighting these fees.

Americans pay a hidden fee on virtually every transaction they make, whether they use a credit card or not, costing consumers tens of billions of dollars a year.

That's quite a bit of money. This hidden fee costs us around 2% of our transaction total, which depending on how many new retail goods you buy can add up to quite a lot over a year.

Even though credit card use is at an all time high in the U.S., credit card interchange fees keep going up...In 2001, Visa, MasterCard and their issuing banks collected $16.6 billion in credit card interchange fees. By 2005, these fees increased to $30.7 billion

It is interesting that these fees continue to increase, especially when credit card companies are already profiting from the insane late fees, overlimit fees, interest rates, and annual fees it charges directly to consumers.

Americans among the highest credit card interchange fees in the world - averaging close to 2 percent for credit card and signature debit transactions, compared with only 0.7 percent in the United Kingdom and 0.55 percent in Australia.

And this was even more interesting. The UK is only charging half a percent for these transactions while we pay 2%. Why?