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Visa's biggest swipe fee changes in a decade may impact small business owners

Feb. 05, 2020
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3 min read
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Visa's biggest swipe fee changes in a decade may impact small business owners
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The world's largest credit card network announced sweeping rate changes for merchants who accept Visa payments.

The new swipe fees, also known as interchange rates, will depend on business category, as well as the customer's method of payment. The updated rates go into effect in either April or October of this year, during Visa's semiannual fee update period.

Rate specifics for each industry are unknown as of yet, and Visa declined TPG's request for further comment.

Credit card economics: A look at the fees you rarely see

But, according to Bloomberg, fees will go up for merchants who process card-not-present transactions, such as online retailers or payment over the phone. And fees will decline for retailers in certain service-oriented industries such as real estate and education, where Visa wants to compete against traditional payment methods like cash and checks.

While interchange rates already vary from industry to industry, Visa typically charges about 2% for in-person transactions, during which a customer hands a physical card to a merchant for payment, while card-not-present transaction fees usually average between 2.3% and 2.5%. Premium cards that come with customer perks trigger a higher swipe fee.

Did you know? Amex now accepted in as many places as Visa, Mastercard

Bloomberg shared two examples of impending rate changes: Merchants will now pay $1.99 on a $100 card-not-present transaction that's charged to a traditional Visa card, up from the current fee of $1.90 — a 0.09% increase. That same transaction, charged to a premium credit card, will cost $2.60, up from $2.50, or a 0.1% increase. A merchant within the category that includes large supermarkets will see a rate drop of 33% for a $50 transaction charged to a premium Visa card, and the total fee will drop from the current $1.15 to just $0.77.

Related: Why are credit card sign-up bonuses so high in the US?

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While rate updates are standard, these impending changes are more significant than usual and will affect both business owners and consumers. Although Visa's interchange rate updates are just a fraction of a percentage point, those few cents per transaction add up very quickly for merchants who experience a fee hike.

Related: Visa, Mastercard settle 13-year swipe fee lawsuit

Interchange fees can be a double-edged sword, costing businesses worldwide billions of dollars each year. These fees are the reason why customers often end up paying higher prices for goods and services, regardless of whether they pay with cash or credit. At the same time, the 2 to 4% profit on swipe fees also pay for consumer perks and rewards on credit cards.

All that to say: This week's news may mean higher prices for all, especially for online retailers. But the change could also pave the way for higher earning rates and additional credit card perks credit card holders have been requesting.

Additional reporting by TPG credit cards reporter Madison Blancaflor.

Featured image by WUTTHICHAI LUEMUANG/EYEEM/GETTY IMAGES

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Best for dining at restaurants

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  • Annual Fee

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  • Recommended Credit

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Why We Chose It

There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)

Pros

  • 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
  • 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
  • Packed with credits foodies will enjoy
  • Solid welcome bonus

Cons

  • Not as useful for those living outside the U.S.
  • Some may have trouble using Uber and other dining credits
  • You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
  • Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
  • Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
  • Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
  • Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
  • Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
  • $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
  • $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
  • $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
  • $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
  • Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
  • No Foreign Transaction Fees.
  • Annual Fee is $325.
  • Terms Apply.