New financial reform will help retailers avoid paying swipe fees

The financial reform bill that’s been moving toward a final vote in Congress has cast light on the relationship between consumers, paying by credit card, debit card or cash, and retailers. 

So-called interchange swipe fee reform represents a critical issue to the grocery retail industry and one that the Food Marketing Institute has championed for over a decade. Thus far, the reform is a strong step toward transparency and competition.

The swipe fee that goes to banks varies. For signature-based debit cards issued through Visa and MasterCard, the fee is around 1% of the purchase amount. For PIN-based debit card payments, the fee charged to merchants is a set amount per transaction. That fee varies depending on the debit network handling the transaction, but a likely amount would be around 55 cents.

Merchants pay higher interchange fees to banks when customers pay with credit cards. The National Retail Federation says Visa and MasterCard banks charge a fee of about 2% of the purchase amount.

The swipe fees can wipe out profits on low-cost purchases.

Thus far, the reform is purposed to help retailers avoid paying swipe fees, by giving retailers the legal right to set a minimum purchase amount of $10 for any customer who chooses to pay by credit card.

Another change would influence the swipe fees that merchants pay for debit card transactions. It would give the Fed the authority to create rules for how the nation’s biggest banks set debit card swipe fees. The banking industry expects that will lead to lower swipe fees for debit card transactions.