Interchange is the biggest credit card fee you have never heard of
Credit card interchange fees are hidden in the cost of virtually everything you buy. Nearly $2 of every $100 the consumer spends using credit cards goes directly to the credit card companies. These fees inflate the cost of nearly everything consumers buy even when they pay by cash. Americans paid more than $42 billion in interchange fees in 2007, about twice what was paid in credit card late fees.
...and the fee you pay that pays for all that credit card junk mail!
The credit card interchange fee started out in the 1960s as a way to cover the real cost of a card transaction to the banks. Everything was done on paper then and credit card processing took far more time and manpower than today. Nowadays everything is done by computer yet credit card interchange fees have more than doubled since 2001 alone. Only 13% of the credit card interchange fee now goes to pay the real cost of the transaction, the rest goes to things like credit card junk mail.
US consumers pay twice or more what consumers in other countries pay
American consumers pay among the highest credit card interchange fees in the industrialized world, three times what British consumers pay. In Britain and some other industrialized countries, credit card interchange fees are viewed as unjustified and harmful to competition. Some countries, including the EU, are taking steps to deal with credit card interchange fees even though the fees consumers pay overseas are much lower than what Americans pay. The United States lags far behind the British, the European Community, and our other major trading partners in terms of grappling with this threat to open markets and free competition.
These secret credit card fees hurt consumers and merchants
US interchange rates are among the highest worldwide precisely because the fees are set in secret and hidden from view. Raising interchange fees is how Visa and MasterCard encourage banks to issue more credit and debit cards - as long as rising rates are kept top secret, consumers have no way of knowing the extra costs they are paying. Visa, MasterCard, and the big bank credit card issuers win; only merchants and consumers who are kept in the dark lose.
Visa and MasterCard operate like price-fixing cartels and violate federal antitrust laws. Visa issuers collectively set credit card interchange fees in secret and MasterCard issuers separately do the same. The fees can't be negotiated and are not adequately disclosed to merchants or consumers. That's why unfair credit card interchange fees continue to rise rapidly despite improved processing technology, consistently low interest rates, and rapidly rising card volume.