Established Contributor
stan_the_man
Posts: 855
Registered: ‎06-29-2010
Re: Merchants may be allowed to charge extra for credit cards

Revelate wrote:

FrugalRican wrote:

+1 Stan.

 

As a former business owner, it was the swipe fee that could become a killer.

I've never heard of having to pay for someone's rewards on their card.



Whoa, you guys are auto-dimissing what could be right, and is at least partially so.  

 

There are different tiers when it comes to processing merchant transactions, and under at least the typical 3 tier model I know regular bland cards are tier 1 (fully qualified) and rewards cards are tier 2 (partially qualified).  I don't know where they fall on a 6 tier model which I've heard is being more and more used or what the specific differences are.

 

Anyway, to my limited knowledge the rates on tier 2 are higher than tier 1; I don't know if this is the full rewards price, but it's non-zero.

 

 



The spread ranges from 0% on up to a max of 95 basis points (0.95%) for Visa cards:

 

http://usa.visa.com/download/merchants/visa-usa-interchange-reimbursement-fees-june2012.pdf

 

One issue smaller merchants may run in to is that merchant service providers heavily advertise the swipe fees for the lowest cost/tier of cards and bury the costs of the more expensive cards. They do this, because 1) the system is complex but also 2) because it allows them to hide important details. It's entirely possible that you pay more than a 1% spread between the cheapest and most expensive cards because of that marketing.