“Due to a recent 250 [percent]+ rate increase by MasterCard on small-ticket debit card purchases…this location will temporarily stop accepting MasterCard bank debit/check or prepaid cards,” the sign reads.
MasterCard and Visa, two of the largest card processing firms in the world, announced last fall that they would be raising fees for small-ticket debit purchases.
In October, the Federal Reserve instituted a cap on debit card fees at 24 cents, though many smaller-ticket retailers have struggled with the fee cap. Retailers that sell low-cost goods often pay the same rate in interchange fees as a retailer who sells higher-cost items such as furniture and electronics, forcing many of these retailers to raise the price of goods.
Sanjay Sakhrani, a credit card industry analyst at investment bank Keefe, Bruyette & Woods, said that while banks pay between 10 to 20 basis points to the credit card processors, many banks collect 150 to 200 basis points from merchants to cover the costs associated with interchange fees. Convenience store owners have complained that the card costs are the second-highest operating expense after payroll, Barron’s reports.
When retailers made the case in Washington for lower interchange fees, they promised that the savings would be passed onto customers in the form of lower prices. Recently, however, several New York gas stations were reportedly charging more than $2 per gallon to process debit transactions, while data from the Electronic Payments Coalition revealed that gas stations are saving approximately $1 billion annually as a result of the interchange cap, according to The Huffington Post.
“Whenever Congress meddles in an industry debate over who pays what, consumers never win,” Trish Wexler, a spokeswoman for the EPC, said. “One side gets a leg up and keeps their windfall, while consumers end up footing the bill.”