When consumers use debit or credit cards to make purchases, merchants are assessed fees for processing the transactions, the largest of which is called an "interchange" fee. Rising interchange fees, along with the growing dominance of card transactions in the payments system, have brought increasing scrutiny from regulators on the appropriate level of interchange fees and the competitive aspects of card networks. A look at the trends, mechanics, and economic role of interchange fees indicates that the issue is more complicated than it may initially appear.
Bloom Raskin, Sara, "Interchange Fees," Testimony before the Subcommittee on Financial Institutions and Consumer Credit, Committee on Financial Services, U.S. House of Representatives, Washington, D.C., February 17, 2011.
"The 2010 Federal Reserve Payments Study: Noncash Payment Trends in the United States: 2006-2009," Federal Reserve System, April 5, 2011.
Federal Reserve Board of Governors press releaseconcerning proposed rules establishing debit card interchange fee standards and prohibiting network exclusivity arrangements and routing restrictions. December 16, 2010.
"Rising Interchange Fees Have Increased Costs for Merchants, but Options for Reducing Fees Pose Challenges," Government Accountability Office Report to Congressional Addressees, November 2009.
Prager, Robin, Mark Manuszak, Elizabeth Kiser, and Ron Borzekowski, "Interchange Fees and Payment Card Networks: Economics, Industry Developments, and Policy Issues," Federal Reserve Board of Governors Finance and Economics Discussion Series No. 2009-23, May 2009.