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HOUSTON -- Independent dealers and jobbers and using the Shell network to process debit- and credit-card transactions received some good news today when the Houston-based oil company announced it would roll back its bankcard processing fees to Shell and Texaco retailers and wholesalers.
Shell Oil Products US and Motiva Enterprises LLC jointly said the they would reduce the processing fee for MasterCard and Visa transactions from to 2.80 percent from August 1 through the end of the year. The reduction in bankcard fees is a response to the settlement of the recent class action lawsuit involving MasterCard and Visa, where both credit-card firms were required to adjust their rates.
"It is our goal to provide Shell and Texaco retailers with the best over all credit card programs at the lowest possible cost. With this goal in mind, we are taking this opportunity to reduce our bankcard processing fees," said Mike Iribarren, general manger of credit cards for Shell Oil Product US.
Rates for the calendar year 2004 will be published once Shell receives notification from Visa and MasterCard, now targeted for December, 2003.
Retailers through the years have not thought much about the simple question: Debit or credit? But it was at the heart of the multibillion-dollar, six-year legal battle that was settled last month by retailers including Wal-Mart Stores and credit-card companies Visa USA and MasterCard International. That settlement is now changing how customers pay for everything from gas to groceries and the fees retailers are charged for accepting the cards customers are paying with.
Customers can utilize three different payment methods with Visa and MasterCard. The first is a straightforward credit-card transaction in which customers use a credit card to pay for purchases and the amount goes right to their credit-card account. Merchants pay $1.50 to $2 for a $100 purchase to process transactions, which they typically don't mind paying because they want to be able to offer consumers the choice of using credit cards.
The second way for customers to pay is with a debit card using a signature. Even though they are paying with a debit card, they hit "credit" at the store counter. The transaction is routed through a credit-card network supported by many of the nation's banks. Retailers pay an average of $1.64 per $100 transaction because it flows through the credit-card network.
The third way to pay is with a debit card using a PIN, instead of a signature. This is a straightforward debit transaction where the money comes directly out of a customer's account. Retailers pay from 9 cents to 25 cents per each $100 transaction. The transaction flows through networks such as NYCE, Star or Pulse.
Given these differing rate structures, retailers argued that they should not be forced to pay higher fees with the signature-based debit transaction when they could opt for the cheaper PIN-based transaction. But they didn't have a choice because of a policy called "Honor all Cards." Under this policy, if a retailer accepted a Visa credit card it was also obligated to take a Visa debit card, and if customers signed a receipt, the retailer was billed for a credit-card transaction regardless.
But now, under the settlement, Visa and MasterCard have to lower their fees by a third, starting Aug. 1. Visa, for instance will drop its fee from $1.64 to $1.16 for every $100 purchase. As part of the settlement, retailers will be able to suggest customers choose debit and use their PIN, because it is cheaper for them.