Effective 4/1/2009 Visa and Mastercard are increasing their interchange fees. These fees are generally passed on directly to merchants. The fees are relatively small, but the big picture will create a lot of additional revenue for Visa and Mastercard. The bulk of the interchange rate that is charged kept by the issuing bank. The interchange fees will pass to V & MC.
What does this mean? It means that merchants with a large number of transactions will be paying more for their credit card processing costs. A company like Amazon.com could end up paying $1 million dollars in additional fees per year. These fees can really add up for a small business too. For example, a restaurant averaging 100 transactions per day could see an increased monthly cost of $30. Not earth shaking, but this is half of the phone bill at a time when every little bit counts.
Where are these fees going to end up and how can we profit? This might be the ideal time to get long Visa and Mastercard. These two companies essentially have a license to print money. The interchange fee change, rather than the semi-annual interchange rate change, will go directly into the coffers of the card companies rather than the issuing banks.