Visa, MasterCard to Raise Small-Purchase Fees, Analyst Says

Visa Inc. (V) and MasterCard Inc. (MA), the world’s largest consumer-payment networks, will raise debit-card fees charged for small-ticket purchases to the full amount allowed under new rules, according to an analyst.

Visa, the world’s largest network, and No. 2 MasterCard may increase fees from 8 cents on a $2 purchase to 23 cents, Thomas McCrohan, an analyst at Janney Montgomery Scott LLC, wrote in a note. They will eliminate the so-called interchange portion of the fee, charging the highest amount allowed by rules announced in June, McCrohan said yesterday in an interview.

The change “will kill the economics for small-ticket debit purchases and influence a shift back to credit cards,” McCrohan wrote. “It will almost certainly lead to a merchant revolt against the card networks.”

The Federal Reserve said June 29 that U.S. debit-card transaction fees, mandated by the Dodd-Frank Act, can’t exceed 24 cents on an average transaction, replacing a formula that averages 1.14 percent of the purchase price, or about 44 cents. The limits, championed by U.S. Senator Richard Durbin, an Illinois Democrat, spurred banks to curtail debit-card rewards programs and add fees for checking accounts.

The fee increase could be an attempt by San Francisco-based Visa and MasterCard to recoup fees for banks, to affect consumer use of mobile payment services or to influence a pending lawsuit, McCrohan wrote. The caps may reduce revenue at U.S. banks by $8 billion, data compiled by Bloomberg Government show.

MasterCard’s Interchange Structure

“MasterCard recently informed our issuers that we will implement a two-tiered interchange structure,” James Issokson, a spokesman at Purchase, New York-based MasterCard, said in an e-mailed statement. “As we have noted throughout this process, setting price caps will -- and has -- created distortions in the market.”

Will Valentine, a Visa spokesman, declined to comment.

The Fed capped debit fees at 21 cents per swipe. It will let issuers tack on 5 basis points of each transaction, or almost 2 cents based on the average debit ticket of $38, and a conditional 1-cent adjustment for lenders that follow certain fraud-prevention standards.

To contact the reporter on this story: Dakin Campbell in San Francisco at

To contact the editor responsible for this story: David Scheer at

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.