EFT network NYCE raised interchange for issuers by 1.1 cents in October of 2009. Competitor Star EFT is also changing interchange rates and eliminating fee maximums. Both networks are doing so as an incentive to banks to use their networks.
Merchants are the ones who will be absorbing the new fees and many merchants will be hard hit. The ones suffering the most will be in the quick-service, medical, and small-ticket areas.
Consider a fast-food restaurant that currently pays 1.25% plus 3 cents in interchange. Based on a $10 average ticket, fees will rise a whooping 77%, jumping from 27.5 cents from 15.5 cents. In addition, Star issuers will get an extra 2.5 cents, bringing the total cost of the transaction to almost 30 cents.
Star is also eliminating the existing 45-cent maximum, which would have capped the fee on all transactions over $24. Now the transaction fees will increase as the ticket size rises.
Medical providers often have co-pays of $15. Under the new changes, the discount rate will stay at 1.2% but the transaction fee will jump from 5 cents to 20 cents. As a result, processing fees the $15 average ticket will jump 65%, rising from 23 cents currently to 38 cents. Star issuers get an additional 2.5 cents so the price rises even more, to over 40 cents.
Other small-ticket merchants will see transaction fees rise from 5 cents to 15 cents on all transactions. Plus, an additional 2.5 cents for Star issuers.
Once again, merchants suffer while banks and processors manipulate the system to line their own pockets.
For more information, contact email@example.com