Understanding Swipe Fees and Interchange
Interchange is a small fee collected by card-issuing banks each time a merchant accepts payment from a customer using a credit or debit card. Many years ago, interchange originated as a fee to support the cost of maintaining payment processing networks by the payment card associations and member banks. Merchants realized that participating in these networks introduced them to larger pools of consumers and opened up new marketing opportunities for them.
Over the years, as payment card usage became ubiquitous among consumers and merchants alike, everything began to change. Card associations and issuing banks began promoting more competitive payment card products.
These premium cards offered the consumers who used them incentives in the form of points and rebates.
To pay for the consumer benefits, these cards came with higher interchange rates.
As premium cards became more popular, merchants felt they were getting shortchanged in the arrangement.
By paying higher interchange fees, the merchants were subsidizing the cost of promotions that encouraged consumers to use these more costly payment products.
Yet all the benefit that came from purchases made with the higher priced cards went to the card associations, issuing banks, and consumers.
From their perspective, the merchants were paying all the cost but seeing none of the benefit.
Furthermore, the vast majority of merchants felt they had absolutely no power to negotiate interchange rates or card acceptance rules with the card associations or issuing banks.
This infographic shows how card swipes work their way through the system (please keep in mind that this is a complex process, and certain parts and numbers have been simplified for this graphic).
Disclaimer: You can file yourself without using a claims recovery service like Brownstone by going to www.paymentcardsettlement.com or calling 1-800-625-6440. Claim forms are being delivered and are available online beginning December 1, 2023. Class members need not sign up for a third-party service in order to participate in any monetary relief. No-cost assistance is available from the Class Administrator and Class Counsel during the claims-filing period. Additional information regarding the litigation, is available at http://www.paymentcardsettlement.com.