Debit card interchange fees will decrease on October 1, 2011. This is good news for merchants who have long complained that the interchange fee, also known as a swipe fee, was too high and cut into their profits. The new regulations are helpful, but the interchange fee will continue to be a complicated and costly issue between retailers, banks and credit card processors.
Consumers give little thought to the interchange fee that is charged every time they swipe their debit or credit card, but the fee can take a large bite out of a retailer’s profit. Currently, the interchange fee averages 44 cents per transaction but the reduced fee will be 21 cents plus an additional amount to cover losses from fraud.
This will save retailers a lot of money, but the new ruling did not address what happens to the interchange fee if the purchase is returned. Even though the merchant refunds the full purchase price to the consumer when an item is returned, the retailer may take a loss on the transaction because credit card processing charges are not refunded to the retailer when a transaction is reversed. Some processors may even charge a second interchange fee when an item is returned (MerchantCouncil.org).
Returns and chargebacks are costly and a retailer with a high percentage of chargebacks can pay a higher fee.
While holding on to this fee sounds like one more way banks and credit card processors are squeezing money from customers and retailers, it is difficult for the system to run in reverse. It would be hard to create a system that accurately and quickly refunds credit card processing fees.
The easiest way for merchants to recover this fee is to charge customers a return or restocking fee. However, many merchants are reluctant to charge this restocking fee because it could stir anger in their customers.