Tuesday, 05 July 2011

• eCommerce Credit Card Processing Interchange

  eCommerce credit card processing interchange fees are not in fact a hidden tax nor are they paid by consumers. Instead, this is a fee that is paid between the card acceptor's bank and the issuer. It is just a component of the discount, which is the compound fee retailers are charged for the service they get when they choose to take credit cards, as well as other other forms of bank cards.

  Among the many benefits associated with accepting electronic payments are increased sales, fraud prevention and quicker payment. The eCommerce credit card processing discount, which consists of costs such as accepting payments or leasing terminals, are but one of several charges a merchant is assessed for managing its day-to-day operations, such as power, gas, rent or advertising.

  Customers are fully aware that retailers have to account for all of the expenses associated with running their operations by adding them into their prices. Attempts to call such components a "hidden tax" on customers are much like attempting to misrepresent a merchant's rent or utility expenses as a "hidden tax" on customers.

  What is more, eCommerce credit card processing interchange rates are far from hidden. The Associations (MasterCard and Visa) publish all of their interchange fees biannually on their websites, and merchants are free to make them available to their customers. Retailers may choose instead not to disclose these charges to customers, just as they elect not to disclose any other costs of doing business or how they price their merchandise.

  Interchange in reality serves to minimize costs for consumers by providing incentives for merchants to take cards, to financial institutions to issue them, and to consumers to use them. There are costs that the parties participating in a payment cycle incur and they have to be balanced among the participants. Simply limiting interchange fees for merchants will end up increasing costs for both issuers and consumers. It's actually already happening.

  If issuers are not sufficiently compensated, through the interchange, for the credit risk they take, fraud protection they provide, and all the other benefits they provide to retailers, they would start issuing fewer cards, minimize reward programs and increase fees for customers. Additionally, with fewer cards in circulation, eCommerce credit card processing account users will ultimately lose the benefits they get from accepting cards.

  In Australia, for example, where the interchange fees were limited by the government, customers ended up being charged additional fees experienced rising interest rates, and their rewards programs were substantially reduced. Moreover, there is absolutely no proof that merchants have lowered prices at their stores.

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