Visa’s New Prepaid Card Interchange Schedule Favors Grocery Stores

by Mercator Advisory Group 0

Visa Inc. released its new interchange fees on Oct. 1, and these fees offer lower rates to grocery stores than other merchants, and they hit gas stations particularly hard, according to one blog.

Supermarkets’ interchange fees are capped at 35 cents, but basic retailers have no such protection. Remember that the interchange rate is lower for transactions under $25, or about 45 cents in swipe fees. This means that supermarkets get the benefit of lower rates on small transactions, and are protected from the higher rate by the cap. Basic retailers, on the other hand, will pay much higher fees for all transactions that top $25.

While supermarkets were insulated from rate hikes, gas stations saw their rates skyrocket. Although the fixed per-transaction cost is 2 cents less, the variable cost is 0.4 percent higher. Though the numbers might seem negligible, this results in a rate increase in transactions over just $5. They enjoy a 95-cent fee cap, which sounds generous, until you realize that the cap doesn’t go into effect unless someone spends more than $70 to fill up their tank. Assuming $4 a gallon of gas, that’s 17.5 gallons pumped per visit – unrealistic for most cars.

The hike at gas stations comes in large part on automated fuel dispenser transactions, according to a story in Digital Transactions Magazine (http://www.digitaltransactions.net/news/story/3200).

The biggest increase in the Visa-branded prepaid categories is for automated fuel dispenser transactions, where the rate will go from 0.75 percent plus 17 cents, with a 95-cent cap, to 1.15 percent plus 15 cents, with the cap remaining. On a $50 fill-up, the merchant will pay 73 cents versus 55 cents currently, an increase of 33 percent.

Given the automatic holds placed on cards when they are used at the pump, many prepaid card users tend to take their cards inside and use them in the station. In addition, the change may not mean as much to gas stations, because many of them, particularly independent stations, offer discounts for customers who pay in cash.

Read more at : http://blogcritics.org/culture/article/visa-picks-favorites-with-new-prepaid/#ixzz1aURutzaw