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

Feb. 05, 2020
3 min read
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 Getty Images/EyeEm

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Cons

  • Weak on travel outside of flights and everyday spending bonus categories
  • Not as useful for those living outside the U.S.
  • Some may have trouble using Uber/food credits
  • Few travel perks and protections
  • Earn 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months of Card Membership.
  • Earn 4X Membership Rewards® Points at Restaurants, plus takeout and delivery in the U.S., and earn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X).
  • Earn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
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  • Choose the color that suits your style. Gold or Rose Gold.
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  • Terms Apply.
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Apply for American Express® Gold Card
at American Express's secure site
Terms & restrictions apply. See rates & fees
Best for the well-traveled foodie
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

4XEarn 4X Membership Rewards® Points at Restaurants, plus takeout and delivery in the U.S.
4XEarn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X).
3XEarn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
  • Intro Offer
    Earn 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months of Card Membership.

    60,000 bonus points
  • Annual Fee

    $250
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    670-850
    Excellent/Good

Why We Chose It

There's a lot to love about the Amex Gold card. It's been a fan favorite during the pandemic because of its fantastic rewards rate on restaurants (that includes takeout and delivery in the U.S.!) and U.S. supermarkets. If you're hitting the skies soon, you'll also earn bonus points on travel. Paired with up to $120 in Uber Cash (for U.S. Uber rides or Uber Eats orders) and up to $120 in annual dining statement credits at eligible partners, there's no reason that the foodie shouldn't add this card to their wallet. Enrollment required.

Pros

  • 4x on dining at restaurants and U.S. supermarkets (on the first $25,000 in purchases per calendar year; then 1x)
  • 3x on flights booked directly with the airline or with Amex Travel
  • Welcome bonus of 60,000 points after spending $4,000 in the first six months

Cons

  • Weak on travel outside of flights and everyday spending bonus categories
  • Not as useful for those living outside the U.S.
  • Some may have trouble using Uber/food credits
  • Few travel perks and protections
  • Earn 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months of Card Membership.
  • Earn 4X Membership Rewards® Points at Restaurants, plus takeout and delivery in the U.S., and earn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X).
  • Earn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
  • $120 Uber Cash on Gold: Add your Gold Card to your Uber account and each month automatically get $10 in Uber Cash for Uber Eats orders or Uber rides in the U.S., totaling up to $120 per year.
  • $120 Dining Credit: Satisfy your cravings and 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, Milk Bar and select Shake Shack locations. Enrollment required.
  • Choose the color that suits your style. Gold or Rose Gold.
  • No Foreign Transaction Fees.
  • Annual Fee is $250.
  • Terms Apply.
  • See Rates & Fees