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

Feb 5, 2020

This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

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?

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 photo by Getty Images.

Chase Sapphire Preferred® Card

WELCOME OFFER: 60,000 Points

TPG'S BONUS VALUATION*: $1,200

CARD HIGHLIGHTS: 2X points on all travel and dining, points transferrable to over a dozen travel partners

*Bonus value is an estimated value calculated by TPG and not the card issuer. View our latest valuations here.

Apply Now
More Things to Know
  • Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward travel when you redeem through Chase Ultimate Rewards®
  • 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 60,000 points are worth $750 toward travel
  • Get unlimited deliveries with a $0 delivery fee and reduced service fees on orders over $12 for a minimum of one year on qualifying food purchases with DashPass, DoorDash's subscription service. Activate by 12/31/21.
  • Earn 5X points on Lyft rides through March 2022. That’s 3X points in addition to the 2X points you already earn on travel.
Intro APR on Purchases
N/A
Regular APR
17.49% - 24.49% Variable
Annual Fee
$95
Balance Transfer Fee
Either $5 or 5% of the amount of each transfer, whichever is greater.
Recommended Credit
Excellent/Good

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.