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    Interchange Fees On the Rise

    According to NACS, in 2005, credit-/debit-card fees, as a percent of gross profit, were 7.9 percent of gross profit dollars, an increase from 6.1 percent in 2004. On an industry-wide basis, the total cost of credit-/debit-fees was $5.4 billion, a huge increase from the $3.8 billion in fees in 2004 and $3.2 billion in fees in 2003.

    According to NACS, in 2005, credit-/debit-card fees, as a percent of gross profit, were 7.9 percent of gross profit dollars, an increase from 6.1 percent in 2004. On an industry-wide basis, the total cost of credit-/debit-fees was $5.4 billion, a huge increase from the $3.8 billion in fees in 2004 and $3.2 billion in fees in 2003.

    Credit-card fees cost a typical c-store 2.5 to 3 percent of the transaction, which is made up of several components, some of which can be costlier than for other channels. The largest component of credit-card fees — interchange — accounts for roughly two-thirds of the fees charged to convenience stores, NACS reported. To this end, many c-store operators are charged higher interchange rates set by the card associations whose members are card-issuing banks. Each type of card carries different fees that reflect factors like fraud rates, risk factors, transaction volume and processing path.

































    Typical Interchange Fees Paid By Supermarkets

    Card 1994 1997 2001 2004 2005

    Visa Credit 1.00% 1.15% 1.20% 1.24% 1.65% +$0.05 +$0.10*

    MasterCard Credit 1.00% 1.15% 1.20% 1.36% 1.43% +$0.05

    Discover Credit $0.52 1.15% 1.24% 1.26% TBD

    Amex Credit 3.10% 3.10% 2.10% 2.10% TBD

    Signature Debit** NA $0.36 $0.40 $0.35 $0.35

    PIN Debit $0.08 $0.10 $0.15 $0.25 $0.17 $0.50***

    Note: These are the rates paid by most supermarket companies. Visa now offers rates in three tiers or thresholds based on the annual number of transactions and card dollar volume. Threshold III, for example, begins at 6.6 million transactions and $330 million in card volume, while Threshold I rates apply to companies with at least 39 million transactions and $2.2 billion in Visa card sales. * This rate applies to the proliferating cards that feature reward programs, and to the Visa Signature credit card. The 2004 rate still applies to cards that don't offer such programs. ** For supermarkets, these rates are set as a percentage of the transaction with caps. The caps increasingly don't apply when customers use debit cards linked with reward programs. *** These fees are set by the card companies and regional debit transaction networks, which charge different rates. Banks can control which networks are used, often routing transactions through the networks that charge the highest fees.

    Source: Food Marketing Institute Backgrounder

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