Visa, AmEx clash with Wal-Mart, Target on $48 billion in fees

Visa Inc., American Express Co. and JPMorgan Chase & Co., already squeezed by new U.S. curbs on credit-card rates for consumers, are girding for a renewed battle over $48 billion in fees charged to merchants. The laws are expected in House and to bring down interchange fees, levies sometimes topping 3 % that are split among banks for the customer and merchant. Supporters include the biggest retail chains, restaurants and small businesses, which say the fees erode profit and inflate prices. The largest card lenders including JPMorgan and the two biggest payment networks, Visa and MasterCard Inc., are opposed against lobbyists for Wal-Mart Stores Inc. and Target Corp. Interchange is the second-biggest cost after payroll. Merchants want to negotiate lower payments collectively without violating antitrust laws. Lower earnings may derail the rally for shares of card companies including Visa, New York-based American Express and Purchase, New York-based MasterCard. New York-based JPMorgan added 6.25 %. The Credit Card Fair Fee Act would let merchants bargain together on interchange rates. Card networks and lenders would be forced to disclose components of the fee and how banks share the money. Interchange accounted for 19 % of revenue last year for card-issuing banks on the Visa and MasterCard networks. The networks handled about 89 % of worldwide purchases on general- purpose payment cards. In a typical transaction, the retailer’s bank deducts 1.9 % from proceeds of the purchase, a sum known as the merchant discount rate. The largest portion -- the interchange fee -- goes to the bank that issued the card. The bank for the merchant keeps what’s left. Interchange fees average 1.7 % of the purchase. Visa and MasterCard get paid a processing fee from each bank of 15 to 18 cents on a $100 purchase. MasterCard and Visa process about 58 billion transactions annually.