Swiping your Visa is about to get more expensive.
This week, Visa announced major fee changes in a document sent to banks, according to Bloomberg. The interchange rates, meaning the amount a business is charged whenever a customer swipes a Visa card, will see their biggest changes in nearly a decade.
While the changes will vary by merchant, they can have a major effect on how consumers are charged at some of their favorite businesses—and what type of card they choose to swipe at the counter. Here’s what you need to know.
Details on the Changes
Credit card companies charge interchange fees to merchants that accept electronic payment. These fees, also referred to as swipe fees, are a booming business: They accounted for nearly $64 billion in payments from merchants to credit card companies in 2018.
A document by Visa states that e-commerce sites can expect to see higher rates, while real estate and education businesses will see the fees decline. Businesses will also start being charged different rates for premium credit cards.
For example, the changes will introduce a hike to “card-not-present” transactions, which can occur when payment is made online or over the phone. Traditional Visa cards used for these transactions will see swipe fees increase from $1.90 to $1.99 on a $100 transaction, and premium Visa cards will see a 10-cent hike from $2.50 to $2.60. Using a premium credit card at the grocery store or large supermarket for a $50 transaction, however, will incur a smaller fee of 77 cents, compared to its old fee of $1.15.
The changes will be implemented in April and October of this year.
What the Swipe Fee Hike Means for Your Wallet
Visa says its changes are part of a broader strategy of trying to increase acceptance of its cards, but it’s a double-edged sword. The industries seeing lower swipe fees could be more inclined to accept Visa, but internet retailers, who solely rely on electronic payment, will bear the brunt of the changes.
The changes appear as just cents on the dollar, but for retailers they quickly add up. As accepting Visa and premium cards gets more expensive, some retailers, especially small businesses, might be less willing to accept them as methods of payment.
Carlos Nolasco owns a bodega, a small neighborhood convenience store, in Bushwick, a neighborhood in Brooklyn, New York. When asked how his business currently handles swipe fees—and how it might handle upcoming hikes—he closes his eyes and takes a long, deep sigh before responding.
“Sometimes I don’t even know how I manage them,” he replies. “And it’s crazy because it’s our money that they’re taking. Every penny counts.” He says the high swipe fees cause small stores like him to barely make a profit.
Since opening his bodega in October 2018, Nolasco has tried multiple third-party payment processors. These processors usually charge the retailer the swipe fee, plus an additional fee to stay profitable. Nolasco says most of the processors he tried “took an arm and a leg” in fees, and he eventually settled on Square, which charges him 2.6%, plus 10 cents, of each transaction. It’s still his cheapest option.
If Square raises its fee in response to Visa’s hikes, Nolasco says he could possibly turn into a cash-only store. He recognizes that he could lose “a ton” of business by doing so, but sometimes he feels like he has no choice.
Consumers will, one way or another, be affected by the swipe fee increases for some purchases. If you’re worried about what they mean for your wallet, consider these three tips:
Pay in cash when you can. Though cash is no longer king when it comes to transactions in many parts of the world, making an effort to pay in cash at small businesses whenever you can will go a long way. Some stores even offer discounts for individuals paying in cash, since they don’t have to pay any processing fees on the transaction—ask your favorite store owners before paying for your items.
Use a cash back credit card. Consumers could see some of their favorite small businesses raise prices to offset Visa’s swipe fee increases. In that case, they should make the most of inflated prices by using a generous cash back card, like the Citi Double Cash card, to at least earn some money back with each swipe.
Stack cash back services with a cash back credit card. Since e-commerce businesses are likely to see the biggest increase in swipe fees, consumers can try to offset any merchandise price increases by using both an online cash back portal and a cash back credit card.
Rakuten (formerly eBates) is a cash back site that offers a percentage of cash back on purchases from participating retailers. Cashback Monitor is a great tool to compare cash back rates among a variety of portals. Utilizing a portal and paying with a generous cash back card can boost savings for consumers shopping online.
Kelly Anne Smith, Forbes Staff Advisor
