U.S. C-Store Merchants Call for Action on Swipe Fees

New Canadian agreements lowering Visa, Mastercard swipe fees 27% take effect this fall
Visa and Mastercard  swipe fees
Photograph: Shutterstock

While U.S. convenience stores are contending with inflation exacerbated by high credit-card interchange fees, the Canadian government finalized agreements this month with Visa and Mastercard to lower the swipe fees merchants will pay starting this fall.

The announcement from the Canadian government prompted Washington, D.C.-based Merchant Payments Coalition (MPC) to call for U.S. lawmakers to address the swipe fee issue in this nation.

“U.S. merchants and their customers pay twice as much as Canadians and seven times as much as Europeans,” said Doug Kantor, an MPC executive committee member. Kantor also is general counsel for the National Association of Convenience Stores (NACS).

“It doesn’t make sense that the country that invented the credit card and is home to the two largest card networks on the planet has the highest swipe fees in the industrialized world. It’s time for Congress to act and at least bring competition to U.S. swipe fees,” Kantor said.

Average U.S. Fee is 2.2%

Some swipe fees in the United States can be as high as 4%, the Merchant Payments Coalition said, while the average swipe fee is 2.2% of the transaction.

The Canada agreements, aimed at helping small businesses, are expected to reduce swipe fees at Canadian merchants to 0.95% from 1.4%, a 27% drop, for about 90% of businesses accepting credit card payments, according to the Department of Finance Canada and the MPC, which represents convenience stores, gasoline stations and other retailers in fighting for a more competitive and transparent card system in the U.S.

Total U.S. swipe fees climbed 17% last year to a record $160.7 billion, the MPC said. High swipe fees led to a class-action lawsuit in the U.S.  In the case called In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, which dated back to 2005, the U.S. Court of Appeals for the Second Circuit agreed with a U.S. District Court’s orders to settle the case and grant relief to retailers and other plaintiffs after the credit card giants violated antitrust laws by fixing swipe fees at levels.

In March, a federal appeals court gave preliminary approval for $5 billion to $6 billion in settlement money for retailers covered in the class-action case.  Convenience-store operators covered by the settlement could apply for an award at

'Highest Fees in the World'

Visa and Mastercard’s market dominance in the U.S. hasn’t been regulated to the same extent as in other nations, where laws or agreements to hold the line on the interchange fees, Kantor said. “So everywhere has been able to reduce the fees more than the United States. We have the highest fees in the world,” Kantor told CSP Daily News Thursday.

The problem in the United States is twofold, he said. “Visa and Mastercard have been found to have market powerthey’re a monopoly or duopoly,” he said. And U.S. lawmakers haven’t been willing to tackle the swipe fee issue head on. “Where other places government are willing to step in and say we have a market failure,” U.S. lawmakers haven’t addressed the issue, Kantor said.

U.S. legislation that aims to increase competition among credit card companies was introduced last year as the Credit Card Competition Act and is expected to be reintroduced this Congress session, Kantor said. “It sets up market competition, which could reduce the fees. That’s not a predetermined outcome.”

Another possibility is a change in regulations for debit-card fees, which the Federal Reserve Board of Governors could facilitate this year when it meets as scheduled to produce a report on debit-card fees, Kantor said.

Complicated Fee Schedule

Besides being costly, swipe fees lack transparency and vary depending on the card used, the kind of purchase and the merchant size. “They charge different fee rates depending on the type of card and type of merchant. They have a complicated fee schedule. Mastercard’s fee schedule is like 100 pages long,” Kantor said. “It tends to be the very high reward cards are expensive.”

In Canada, businesses with annual Visa sales volume of less than $300,000 will qualify for the lower Visa interchange fees, while businesses with annual Mastercard sales volume below $175,000 will qualify for the lower Mastercard interchange fees, the Canadian government said. The lower fees are expected to save small businesses about $1 billion over five years. Consumers are expected to see some price drops from the lower fees as well.

High credit card fees in the United States are one reason many convenience stores encourage customers to sign up for loyalty programs, said Jimmy Frangis, CEO of loyalty technology company PDI Technologies, Alpharetta, Georgia

“We’ve all been challenged on credit card fees in the industry and the impact it has on our customers,” Frangis said in a webinar on the state of the convenience-store industry Thursday. “A lot of the way we think about it, if you can take your loyalty solution and you marry it with your payment solution, you can bring some innovation,” he said.

Loyalty Discounts

“By signing up more active users, you give them a real benefit of a lower cost fuel purchase through a different payment type, an ACH payment,” Frangis said. When consumers link their loyalty accounts to their debit cards for payment, the merchant doesn’t have to pay credit-card interchange fees because the money is drawn straight from their checking accounts, said Kantor.

But many loyalty programs allow consumers the option of linking a credit card, and many consumers prefer this. If they’re paying with Visa or Mastercard, the merchant is paying interchange fees even if it’s a loyalty purchase, he said.

Most c-sore loyalty programs offer price discounts on gasoline and other purchases as members accumulate points by purchasing goods and services at the convenience store.

PDI Technologies owns GasBuddy, an app designed to make fuel savings more accessible for consumers. Its Loyalty Connect solution provides GasBuddy users with gas stations offering the lowest prices. “As we know, there’s the street price and the loyalty price, which could be very different,” said PDI Technologies Chief Operating Officer Linnea Geiss.

“The loyalty price is a great opportunity to attract new consumers and then let your loyalty members know when they’re out there driving around that they’ve got a better price than what’s out there on the street,” Geiss said.

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