Visa, MasterCard to Raise Fees on Small Buys

[marmar]

(Bloomberg) Visa Inc. (V) and MasterCard Inc. (MA), the world’s largest consumer-payment networks, will raise debit-card fees charged for small-ticket purchases to the full amount allowed under new rules, according to an analyst.

Visa, the world’s largest network, and No. 2 MasterCard may increase fees from 8 cents on a $2 purchase to 23 cents, Thomas McCrohan, an analyst at Janney Montgomery Scott LLC, wrote in a note. They will eliminate the so-called interchange portion of the fee, charging the highest amount allowed by rules announced in June, McCrohan said yesterday in an interview.

The change “will kill the economics for small-ticket debit purchases and influence a shift back to credit cards,” McCrohan wrote. “It will almost certainly lead to a merchant revolt against the card networks.”

The Federal Reserve said June 29 that U.S. debit-card transaction fees, mandated by the Dodd-Frank Act, can’t exceed 24 cents on an average transaction, replacing a formula that averages 1.14 percent of the purchase price, or about 44 cents. The limits, championed by U.S. Senator Richard Durbin, an Illinois Democrat, spurred banks to curtail debit-card rewards programs and add fees for checking accounts. ............(more)

The complete piece is at: http://www.bloomberg.com/news/2011-09-22/visa-mastercard-to-raise-fees-on-small-purchases-analyst-says.html

[SoCalDem]

1. They are probably pissed at folks like me who do not carry a balance

Watch for stores to lobby for cash-discounts equal to the increase..

[county worker]

19. How do you carry a balance on a debit card?

[SoCalDem]

21. credit cards/debit

Most are both, and since so many people use them primarily as debit cards, they never have a chance to build up debt on them. I'm sure the companies would prefer to have people charging stuff to them, so some may forget to pay on time.

However it all shakes out, merchants will just raise prices to cover it.

Does it apply online too, or just at POS locations?

[MedicalAdmin]

27. Merchants are bared by contract from offering a discount for cash.

If you do, then your machine will go bye bye.

I'm not sure ... was that what you were referring. If not, then I want to know more.

[SoCalDem]

44. Watch merchants try to get that one changed

If they are barred from offering a discount, but only have to sit by while their margins are attacked by cc companies,I can see them at least trying to fight back for an option to offer cash discounts.

[bedazzled]

77. i didn't know that! gas stations can get away with it.

course, they're a law unto themselves...

[Angleae]

45. Visa/MC couldn't care less.

They don't hold account balances or lend money, the banks/credit unions do. Visa/MC are only transaction processors.

[SmileyRose]

74. Well they are but this is a different issue.

VISA and Mastercard charge the merchant under one set of rules for Credit transactions and a whole different set of rules for debit (put in your PIN) transactions. In general, debit transactions have been cheaper for the merchant because VISA consider those to have less risk of disputes. Now that the rules are changing, Merchants are likely to decide taking debit cards for small purchases is no longer financially viable.

[hobbit709]

2. Stop using debit cards for every piddling little purchase.

I use mine maybe once a month to get gas since it's easier to swipe it at the pump instead of limping into the store. Everything else I pretty much pay cash.

[Gormy Cuss]

6. Debit cards were marketed as a way to live cash free.

It will come as quite a shock to people who are used to using debits for small transactions when vendors start posting minimum purchase notices.

[DainBramaged]

14. And when your bank isn't close enough to make cash withdrawals then what?

Meh meh and meh at your self-righteousness

[hobbit709]

17. Some of us have an idea about how much we spend per day.

Take enough cash out once a week. It doesn't bother me to have cash in my wallet.

and by paying cash, you have a much better idea of how much money you have to spend.

[DainBramaged]

28. well I have $18.39 till I get paid tomorrow

I know how much I have to spend.

[MicaelS]

38. I find I spend much less when I DO NOT carry cash.

And I have an EXACT idea how much I spend because I check my balance several times a day. If you have a bunch of cash and you lose your wallet, that money is GONE. I lose my wallet with plastic, the cards can be cancelled with a phone call, and then easily be replaced the same day when I go to the credit union.

And frankly I simply don't like to carry cash anymore. I usually have no more than $20 in my wallet, and usually even less than that. Right now I have $7 in my wallet.

[RebelOne]

50. Right, I do not use cash for any purchase.

I use my debit card for all purchases and I check my balance online every day. Yes, if you lose your wallet with the debit card, you can always notify the bank and you will not be responsible for any charge over $50. I know because I have had to notify my bank a couple of times when I lost my debit card. And I usually do not have more than $10 in my wallet. Once, I was in a big hurry and left my debit card in the ATM. I realized it later when I went to make a purchase at the grocery. I immediately notified the bank and was told that someone had taken $100 from my account. The bank reimbursed me. And this is the hated Bank of America that everyone at DU hates.

[YellowRubberDuckie]

60. Ditto.

Stop being self righteous about cash that means nothing. It is people like you (not you, MicaelS, the guy you replied to) who are delaying the cashless system.

[Hippo_Tron]

59. I know precisely how much I spend every day, I log into my online banking and look at my history

Not only do I know how much I spent, but I know where I spent it without having to go through the hassle of saving receipts.

[MadrasT]

24. An ATM, perhaps?

My banking establishment is a credit union 200 miles away, with one and only one physical location.

In 27 years, I have only physically set foot in the place once, to get a cashier's check for a mortgage settlement.

I don't use credit cards unless I'm renting a car or paying for a hotel room.

I use my debit card for transactions greater than about $60 and for fuel for my car, and to pay bills online.

I still use checks for things like doctors and plumbers.

For everything else, I pay cash. (I've found that using actual currency curtails my spending because it feels like I'm spending "real money" so I consider it more carefully.)

[MedicalAdmin]

29. I shifted my accounts to a close local bank.

But I get that not everyone has that luxury.

But I NEVER use debit cards for that simple fact that there are huge fees associated with those cards for users (often hidden) and/or merchants who pay MUCH higher fees to process them.

I use a credit card for most company purchases and for our few home purchases that aren't dealt with online.

And the best move I've made was to put myself and my wife ( joint decision - no patriarchy here) on a cash allowance. Each month we both get the same amount of cash to spend on ourselves or others any way we want to. No questions. No second guessing. No overspending. If it ain't in the wallet, it can't be spent.

[snooper2]

72. What did folks do 50 years ago? Write a check every time they needed a piece of gum?

[Codeine]

61. This is 2011. Cash is beyond archaic. nt

[Raine]

63. Drop a $10.00 bill in a crowd and you'll see how "archaic" it is,

people would fight each other to get it. For that matter you could drop a $1. same thing. :yoiks: Cash will never be out of style.

[sinkingfeeling]

3. That's going to be a real surprise for the college-age kids that use their debt cards to buy a

$1.59 Coke. Bet we'll see signs with a 'minimum debit card purchase' required or all the slidey things removed from places like McDonalds, Burger King, etc.

[Shagbark Hickory]

4. Don't be rediculous. College age kids are aggresively recruited by credit card companies!

So what if they don't have any income?

[dkf]

5. Still?

[sinkingfeeling]

7. And so what, if they can't use them to buy $2 worth of stuff? It's the retailers that are

going to be hit with the fee increase and refuse debit cards for small purchases.

[Shagbark Hickory]

11. Merchants are screwed if they do and screwed if they don't. (stop taking DC for small ticket)

If they stop taking them then they miss out on some sales.
If they do take them, they end up spending more on fees.

[MedicalAdmin]

39. This will impact small retail business and family businesses...

especially hard.

I run a medical clinic so there is not a lot of small purchases with us,, but for someone like a dollar store, convenience store, Avon lady?

They are being reined in so they are out to hit the small guys who operate on main street. Dollars will get you donuts that the big players will be given sweetheart deals.

[Shagbark Hickory]

48. Agreed. Most business are probably just going to absorb the cost.

Like me, I'm afraid to raise prices right now despite skyrocketing costs.

[MedicalAdmin]

53. We are looking at increasing costs soon.

Of course, because we don't bill insurance companies, we are able to charge LOTS less than other clinics in the area and are able to pass those saving on to those who may not have insurance or who have crappy insurance.

We might have to increase costs to hire another assistant to help with administrative paper shoveling type tasks. Also we are looking at adding a few more therapists / doctors / etc and that will drive overhead costs down on a person to person basis.

[GreenPartyVoter]

8. I've already seen those signs around.

[Hippo_Tron]

56. As somebody who is slightly older than college age, can you explain this to me?

If there's a 2% interchange fee, the store loses 2 cents if I spend $1. If I spend $100, the store pays a $2 interchange fee. Wouldn't it be better for the store if I put the small purchases on my debit card and gave them cash for the larger purchases rather than the other way around?

[MadHound]

9. OMG, people will have to go back to using *gasp* cash!

This would actually be a good thing.

[Shagbark Hickory]

13. Why? So the banks can make a fortune on ATM fees gouging all the people who are stranded without

enough cash?

This will also impact online and mail/phone order businesses.

[MadHound]

69. Or you could plan ahead and carry enough cash to take care of such small purchases

I hit my bank's ATM once a week or so and withdraw a few twenties. It is enough to take care of small purchases such as coffee, a bite here or there, etc. I'm charged no fees since I use my bank's ATM. If your bank's ATM is charging fees to withdraw your money from their machine, then you can either go real old school and take the extra few minutes to go in and interact with a bank employee, or better yet, switch to a bank or credit union that doesn't charge those kind of fees.

And I don't know about you, but I don't make the kind of small purchase they're talking about via mail order.

[Modern_Matthew]

10. I hit the credit option instead of debit and never pay any fees... nt

[Shagbark Hickory]

12. The fees pertain to the merchant. Not the customer.

Of course when a merchant has higher expenses due to transaction fees, we all know who ends up paying them in the long run.

[MedicalAdmin]

40. It doesn't matter to merchants what button you push.

They get charged a higher rate per transaction on debit cards...

[Shagbark Hickory]

47. What do you mean it doesn't matter? Of course it matters. If you press "DEBIT", they get charged a

higher fee.

If you press "credit," they pay the lower transaction fee.

[MedicalAdmin]

54. Good point. I bow to your superior logic today.

:toast:

First beer is on me.

[Shagbark Hickory]

55. I didn't mean to sound persnickety. I was wanting to edit that to soften the blow but too late now.

:toast:

[MedicalAdmin]

80. No worries mate.

You were right and I am standing here corrected. One of the reasons I like this place is that your ideas must hold up. Mine didn't.

[blueamy66]

75. I will now "hit" the credit option

for my purchases, with my debit card.

[and-justice-for-all]

15. Pay them off and cut them up...nt

[Shagbark Hickory]

30. You don't "pay off" debit cards. To do so would be to spend every penny in the account.

[Tallulah]

35. I think there's some confusion here

Debit is your money.

Credit cards are someone else's money.

Visa/Mastercard have debit cards too.

[tech5270]

16. Years ago dumped my CC and didn't look back

I opened a bank account with a bank that had branches pretty much anywhere I planned to go. I used the debit card to get cash from the ATM and used cash for almost all of my purchases. The debit card was only used for on-line purchases.

I like to stick with cash because there is no record of what I spend and where (except for CCTV camera's)

No fee's from top to bottom and no one can easily track my purchases. If my bank ever starts to charge for ATM usage, they will be a faint memory.

[dmallind]

20. Meanwhile I do the exact opposite

I use c/c for ecerything.

Mo bulging wallets or change jingling, wearing holes or deforming my pants.

1% cash back on everything I spend (try that with cash!) - about $400 a year.

1% interest on my bank balance for 25-55 days until I pay it all off, by direct transfer, with no interest, once a month. Probably only $30-40 a year or so, but it all helps

No trips to the ATM

Much less likely mugging target than carrying a week's or month's worth of cash with me

If that does happen, or if I lose my wallet, my liability is limited to $50 and is likely zero unless I am strangely late in reporting it

I have a backup card in a safe place at home. Keeping a backup bunch of cash would lose me even more interest

Build up an excellent credit score - 812 last time I looked - which gives me far more flexibility and access to low cost loans if I need them

Easy no-hassle way to review and budget spending with online reports for c/c use by date, merchant category, etc.

All I use cash for is vending machines and streetside vendor type transactions.

[Shagbark Hickory]

31. You have to save your receipts or you will miss out on tax deductions if you don't keep track of

what you spend and where.

[MedicalAdmin]

41. I admire that in many ways...

... but for our medical clinic, paying cash simply wouldn't work.

[jwirr]

18. I no longer use cc even for large purchases and I am glad of it.

This industry more than any other is responsible for our huge personal debt problems because they can make more money off your debt when it defaults if they sell it than if you pay it off.

[SidDithers]

22. Bet Apple makes a stink about this...

They're all about micro-purchases. $1.29 for this song, $.99 for that app. I have lots of small transactions against my credit card for iTunes and App Store purchases.

Maybe they'll bundle purchases, and charge monthly.

Sid

[jayfish]

23. poorly Written Bill.

It should have been written as a 1.14% fee, per transaction, to a maximum of $.24. Couldn't see that one coming huh? :eyes:

[marlakay]

25. I think it's going to hit the coffee places

Like Starbucks and Peets. I belong to a local small bank and have to pay a fee to get money out of my area, using the debit card has always worked before. Now I will have to carry cash with me which I don't like because I tend to spend faster when I have cash.

Merchants will start charging a debit card fee for small purchases to make it up..bummer!

[Shagbark Hickory]

33. I doubt it. Merchants don't really know your card is a debit card unless you tell them.

They may likely have minimum purchase requirements to take debit or credit cards. Probably both because unless it's a supermarket or somewhere with a pin pad, they won't really know who's using what.

[SpiralHawk]

26. "Take that, you smelly American proles." - Credit Card, Inc. (R)

"Bwaaaa ha ha ha ha. More more more more for us. Bwaa ha ha ha ha."

- Credit Card, Inc. (R)

[tsuki]

32. CASH.

[Shagbark Hickory]

34. ATM fees. & 40 cents per mile car expenses to get to the ATM.

n/t

[Harmony Blue]

36. Transactions will take longer to process

because more people will use cash. Expect to see longer lines at the grocery stores.

[Shagbark Hickory]

49. Or they'll write checks. UGH!!! I hate getting stuck behind people that write checks.

It's 2011 people!

[Chan790]

65. Maybe it's because I live in the northeast...

but I haven't seen anyplace except apartment rentals that accepts checks in about 10 years. Even the power company and county government here in MD won't take a check.

[Shagbark Hickory]

71. You don't have grocery stores and home improvement centers in the northeast?

Wow, I thought the Northeast was supposed to be more sophisticated than down here.

[Chan790]

73. Not that accepts checks. nt

[Shagbark Hickory]

78. But why would they not want to accept checks?

First of all, checks don't have the fees that plastic does.
Second of all, they can verify the checks are good before accepting them.
Third of all, they don't even have to go to the bank to deposit them anymore. Now many banks offer remote deposit where you run the check through a scanner and the money goes into the account the same day no matter what time the deposit is made.
Fourth of all, they save money from lost or mis-counted cash that is issued as change.

I just think they should have a separate line for paying with checks so that people who are in a hurry like myself doesn't have to wait for someone to write a check, show their ID and all of that crap.

[blueamy66]

88. Really?

What is so important in YOUR life that you can't wait for someone to fill out a check? Are you an ER surgeon? a firefighter? a paramedic? a poliice officer on duty? Cause I cannot imagine any other person that would be so "put out" by someone writing a check.

Really?

[SheilaT]

37. I'm with those who say pay cash for

all small purchases, credit cards for larger ones. I have to say, I can't figure out how anyone can do totally without credit cards. Do they never stay in a hotel? Take an airplane ride? Rent a car?

Anyway, I'm often surprised at how many people use debit cards for everything, and never carry cash. It also seems to me that many of those people are living paycheck to paycheck, and are unable to save any money at all.

I take out enough cash from the ATM on Monday to get me through the week. And it's not that large an amount. I then divide it among several envelopes (gas, grooming, cats, clothing, entertainment, and miscellaneous) and the amount that stays in my wallet is for groceries. It's highly effective.

I learned to hate debit cards when my son got one when he first went to college, and it allowed him to overdraw his account, with huge fees imposed. He and I both thought (oh, silly us!) that a debit card would be denied if there wasn't enough money in the account.

The basics of living within one's means are lost to a lot of people.

[Harmony Blue]

42. I agree

A $20 or two will last you a while for small transactions so it isn't a big deal.

[rainbow4321]

43. Haven't had a CC in years, use my DC, and, at most, have $5 bucks cash on me

And I have gone on a plane, booked a hotel room, and rented a car.

The airline and hotel use my debit card as a CC when I book/pay. The rental car people require 2 recent bills in your name and an extra deposit that you get back when you return the car.

I furnished my apartment (large flat screen, dining room set, book shelves, wall decor, bedroom furniture for my daughter, etc..) not using CC's...shopped around, found good deals, and then used my debit card for the purchase. I had just sold my house so I had some extra cash, we used some of that extra cash carefully when shopping around for better deals and didn't jump at the first store's offer. Ditto with my laptop purchase a few years ago.

[Shagbark Hickory]

51. I remember when debit cards first came out, they were called "CHECK cards"

That of course reminded people that they need to treat each transaction like a check and mark it down in their register. I guess the corporations preferred that customers didn't pay so much attention how much they were spending.

[blueamy66]

76. What? What?

So you are surprised at those poor people that are "living paycheck to paycheck" and use debit cards and never carry cash? Really? And they can't "save" any money at all. Well goody for you.

And you can NOW opt out of allowing debit card transactions go through if you don't have enough funds to cover the transaction. Maybe you should have taught your son how to manage his money, since you are such a whiz at it.

Unbelievable post....

[blueamy66]

87. No answer?

You must be working on your finances and checkbook....

[Curmudgeoness]

46. Maybe I am just too old, because I remember when you had to plan

how much cash you needed for the week. You did not have an ATM on every corner---actually you did not have them at all. There were no such thing as debit cards, and credit cards were rare. You know what....we still survived. We did not have to waste all our time going to ATMs. We did get cash when we took our checks to the bank.

So for all you excuse-makers who think it is just too inconvenient to have a few bucks for your little purchases, get real.

You will end up costing the rest of us who wouldn't think of buying a pack of gum with a card a huge amount in increased prices to cover the fees you are incurring on the merchants. And those higher prices will cost you too.

[Shagbark Hickory]

52. And if you were short a few bucks, you could borrow some from a Brontosaurus.

:rofl:

[Missy Vixen]

57. People didn't work ten to twelve hours a day, over five days a week,

in your little utopia. Most families had a stay-at-home parent (typically Mom; I remember going to the bank with her,) to withdraw money once a week. It's tough to go to the bank for those "banking needs" when you're coming home from work at 7 PM or later. MOST merchants took checks as well.

>So for all you excuse-makers who think it is just too inconvenient to have a few bucks for your little purchases, get real.<

Our credit union is fifteen miles from home. I haven't been to an ATM in probably three months. The only available banking option in a fifteen-mile radius of our house is a BANK, and I'm through with them. Those who carry cash on their persons end up spending a lot more than they would if they pay for items with a convenient debit card. Merchants have also appreciated the ability to operate cashless; it's protection from robberies and guarantees they're not taking the risks they do with paper checks.

I predict a loud and long outcry from Apple, Starbucks, McDonald's, Amazon.com, and thousands of other merchants who depend on less-than-$5 transactions.

[SheilaT]

70. While I do concede that

for some people a debit card is the way for them to handle what would otherwise be cash, I absolutely do not agree that those who carry cash wind up spending more. If you're buying everything with the debit card, how can you possibly know when you've reached whatever spending limit you want to stick to? Once my cash for the week is gone, that's it. So I plan very carefully while I pay attention to the cash I have on hand. I have noticed that those who use debit cards a lot are often those who find it's not possible to save, and they have no idea why.

I never flash large wads of cash, mainly because I'm never carrying that much money at any one time.

Processing the electronic "cash" when you use the debit card for every small amount transaction you use it for does add up. Merchants have to give away whatever the going percentage is to let you use the debit or credit card. And there are merchants who will give a discount for cash. They just don't advertize the fact.

[Missy Vixen]

81. I'm a former merchant

I owned a yarn shop. I would rather people used the card for their purchases than cash; it was a one-person operation, and I preferred to NOT have a large amount of money on my premises at any time.

There are charges for the ATM; it's $3-4 to take out $20 now, and driving to the bank is at least a gallon of gas.

There are a sufficient number of retailers (Apple, anyone?) who will fight back on increased merchant debit card charges. This is probably a non-starter.

[SheilaT]

82. I am not charged anything to take money out of

the ATM of my bank, and it's a large one with ATMs pretty much all over the country. I have paid a transaction fee to get money out of an ATM in years.

Not sure what kind of car you drive, but my little Honda Civic does not use up a gallon of gas to drive the mile and a half to my nearest branch of my bank. And at that, I always stop by and get cash when I am running other errands.

When I do make large purchases, I use a credit card, so trust me, I'm not generally handing over large sums of money to a small business. Earlier today I bought four beads, seventy-five cents each, at a local bead shop. You're suggesting to me that the merchant would rather give up whatever the charge is for such a small purchase than take in my cash? The mind boggles.

[Missy Vixen]

83. We live in a small town

Our credit union is fifteen miles each way. As a result, we have automatic deposit, and visit infrequently. We keep our money with the credit union because it's less expensive in the long run.

I'm happy to know you have a Honda Civic. I have a 1994 Nissan Sentra. And your point would be?

Was the bead store a sole proprietorship? I was. While I had transactions that were less than five dollars (patterns, notions, etcetera,) I also had transactions that were over $100 (sufficient yarn to make an afghan, for instance). I had a sign up stating I had less than $20 in change at all times, for my own safety. The mind boggles that I'd have to come back here and explain this!

[SheilaT]

85. My point about my Civic is

that in my case it takes very little gas to get to an ATM.

Yes, the bead store is a sole proprietorship. And I have spent several hundred dollars at a time in yarn shops or bead shops, although those purchases I always pay with credit card or check.

Rather than pay three or four bucks for each ATM transaction you might want to consider having a bank account with a bank that has ATMs that are actually convenient to use.

My real point is that I'm amazed that merchants are willing to suck up the relatively high charges to allow customers to use debit cards, when cash is, really, so much more convenient.

[blueamy66]

89. Perfect.

I love people who judge others...cause they are perfect.

Your post is spot on.

[Hippo_Tron]

58. People also used to wash their clothes by hand

And when they wanted to look something up, they walked to the library rather than using Google. Just because you've chosen to do without a particular modern convenience doesn't mean the rest of us have to.

[bhikkhu]

62. Everywhere I know of has a $5 minimum purchase. So it doesn't matter.

I don't blame the card companies for raising the fee to the limit, but I seriously doubt that it will make any difference - the bill that was passed cuts the maximum fees in half, more or less. This is a huge reform, and will lake a huge difference to small businesses.

[Hippo_Tron]

64. Can somebody please explain this to me like I'm dumb

If the merchant pays a 2-3% fee on all transactions and I put $1 on my debit card I'm costing them 2-3 cents. If I put $100 on my debit card I'm costing them $2-3. How am I hurting the business more by putting small transactions on my debit card?

[Codeine]

66. Because that small transaction will now have a much higher charge.

It's not a flat percentage.

"Visa, the world’s largest network, and No. 2 MasterCard may increase fees from 8 cents on a $2 purchase to 23 cents, Thomas McCrohan, an analyst at Janney Montgomery Scott LLC, wrote in a note. "

[Hippo_Tron]

67. Gotcha, thanks

[ClarkUSA]

68. Why go to credit cards? Why not carry cash if the purchases are small?

[bedazzled]

79. i work retail and lots of people use debit cards for $2.00 or less

we don't have a pinpad - so all purchases go in as
credit signature. might solve the problem. visa/mc
will figure out another way to screw people, however.

[tritsofme]

84. But only if you use the pin. Who does that?

Most check cards are stamped with Visa/MasterCard. Run it as credit.

[Name removed]

86. Deleted message

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