Analyst: Visa, Mastercard to Up Fees on Small-Ticket Purchases

NEW YORK -- Visa Inc. and MasterCard Inc., the world's largest consumer-payment networks, will raise debit-card fees charged for small-ticket purchases to the full amount allowed under the new rules, according to one analyst.

Visa and MasterCard, the No. 1 and No. 2 largest consumer payment networks respectively, 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. He told Bloomberg that the companies will eliminate the so-called interchange portion of the fee, charging the highest amount allowed by rules announced in June.

As a result, McCrohan wrote in the note, the change "will kill the economics for small-ticket debit purchases and influence a shift back to credit cards." This move "will almost certainly lead to a merchant revolt against the card networks," he added.

The fee change on the part of Visa and MasterCard could be an attempt by the companies to recoup fees for banks, affect consumer use of payment services or influence a pending lawsuit, McCrohan wrote. The new cap on debit card transaction fees may reduce revenue at U.S. banks by $8 billion, according to data compiled by Bloomberg Government.

A representative from Visa declined to speak to Bloomberg for its report; a rep for MasterCard to did not return a message left after business hours by the news outlet.

After intense lobbying efforts by the retail industry and so-called big banks, as well as heated debates in the U.S. Senate, the Federal Reserve Board approved a 21-cent cap on June 30. 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, the news outlet explained.

The new fee regulations go into effect Oct. 1.