Americans spend $50 Billion on Credit Card Processing Fees every year!
Mastercard Rewards Credit Card issued by Mbna America Bank, N.A.
Rewards cards cost businesses more than non-rewards cards because the credit card issuers pass the cost
of the rewards onto the businesses by charging them higher Interchange rates. Rewards interchange rates
are typically around 0.30% higher than the rate for a regular card. However, many smaller businesses actually get charged more than 0.30% additional
for such transactions because it triggers a downgrade, which allows their credit card processor to charge them as much as an additional 1.50%.
When you use this Credit Card, the merchant pays a fee to process the transaction
Different fees apply in different scenarios. Here are some examples:
A pack of gum at a convenience store: $1.50
Credit Card Fees: $0.28
(18.7%)
Percent: 1.995%
Per-Item: $0.25
The average convenience store paid $52,064 last year in credit card processing fees (details) - 2.25 times the average earnings of such a store.
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Interchange Category: Convenience Purchase
| Breakdown of Fees |
| Mbna America Bank: | $0.03 |
| Mastercard: | $0.00 |
| Processing Company: | $0.25 |
A small convenience store is likely to have a lot of very small transactions. When you use this
credit card to buy a pack of gum, the purchase often qualifies as a "convenience purchase" transaction.
These transactions are charged with much lower per-item processing fees.
In this case, the store would pay only $0.25 per transaction,
with a 1.995% percentage-based fee.
Jill's Sandwich Shop: $7.00
Credit Card Fees: $0.36
(5.1%)
Percent: 1.645%
Per-Item: $0.24
A typical sandwich shop like a Jimmy Johns pays about $10,000 each year in credit card processing fees (details) - enough to pay a sandwichmaker for 4 months!
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Interchange Category: Small Ticket
| Breakdown of Fees |
| Mbna America Bank: | $0.15 |
| Mastercard: | $0.01 |
| Processing Company: | $0.20 |
Using your card to buy a sandwich at a restaurant will trigger an Interchange
fee rate of 1.550%,
with a per-item fee of $0.04. This rate is lower than the Standard
credit card rate, because restaurant businesses that swipe the customer's card can qualify
for a better rate.
For small transactions like this, the total $0.24
per-item fee is often more costly to the merchant than the percentage-based fee.
SuperCheese Pizza Delivery: $25.00
Credit Card Fees: $0.95
(3.8%)
Percent: 2.395%
Per-Item: $0.35
The average local pizzeria (not a big chain) pays
$11,213 each year in credit card processing fees (
details) - enough for a new delivery vehicle.
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Interchange Category: T&E;
| Breakdown of Fees |
| Mbna America Bank: | $0.68 |
| Mastercard: | $0.02 |
| Processing Company: | $0.25 |
When you order a Pizza for delivery, the pizzeria is charged an Interchange
rate of 2.300%,
with a per-item fee of $0.10. However, the processor markup raises
the overall fees that the merchant will pay by as much as 0.000%.
This is one of the higher rates, because the merchant does not have access to the card at the time of
the transaction. Orders placed over the phone are especially costly to the merchant if they
do not verify your address.
Tank of Gasoline at a fueling station: $30.00
Credit Card Fees: $0.70
(2.3%)
Percent: 1.995%
Per-Item: $0.10
The average gas station paid $52,064 last year in credit card processing fees (details) - 2.25 times the average earnings of such a store.
More Info
Interchange Category: Petroleum
| Breakdown of Fees |
| Mbna America Bank: | $0.57 |
| Mastercard: | $0.03 |
| Processing Company: | $0.10 |
Per-item processing fees are lower for transactions at automated fueling stations, because of
the large volume of transactions at service station relative to the transaction size.
A typical per-item fee when you swipe your card at a fueling station would be $0.10.
However, gas stations also pay approximately 1.995% in
percentage-based fees.
Books at Bookseller.com: $50.00
Credit Card Fees: $1.35
(2.7%)
Percent: 2.395%
Per-Item: $0.15
Online retailer bluenile.com paid $6,120,000 in credit card processing fees (details) in 2007.
More Info
Interchange Category: T&E;
| Breakdown of Fees |
| Mbna America Bank: | $1.25 |
| Mastercard: | $0.05 |
| Processing Company: | $0.05 |
When you make a purchase online, the Interchange
fee rates are generally higher due to the risk of fraud.
Typical total rates for online retailers for a purchase of this type are 2.395%.
This rate assumes that the online retailer uses Address Verification (AVS), which
is a fraud-protection measure that qualifies the merchant for lower rates.
Groceries at your local Jewel/Osco: $100.00
Credit Card Fees: $1.47
(1.5%)
Percent: 1.415%
Per-Item: $0.05
If everyone used your Credit Card, an average grocery store (with $14M in revenue) might pay $205,100 in fees each year!
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Interchange Category: Supermarket - Tier 2
| Breakdown of Fees |
| Mbna America Bank: | $1.32 |
| Mastercard: | $0.10 |
| Processing Company: | $0.05 |
Large Grocery chains are able to negotiate lower rates for their Credit Card Processing.
In addition, very large grocery stores qualify for "tiered pricing", in which they receive
discounted rates if the total transaction volume exceeds a certain threshold. Thus, the
percentage-based fee that a supermarket chain, like Jewel/Osco, might pay is approximately
1.415%.
Electricity Bill over the phone: $150.00
Credit Card Fees: $0.80
(0.5%)
Percent: 0.095%
Per-Item: $0.66
If everyone used your Credit Card,
Exelon might pay
$101,200,600 in fees each year!
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Interchange Category: Utilities
| Breakdown of Fees |
| Mbna America Bank: | $0.65 |
| Mastercard: | $0.14 |
| Processing Company: | $0.01 |
Public utilities often get special credit card processing rates, due to their large transaction
volume and government-protected status.
For this credit credit card, the utility company only pays a flat per-item transaction fee of
$0.66,
with zero percentage-based Interchange fees.
They may, however, pay a small percentage-based processor markup.
Flight to California on BlueSky.com: $300.00
Credit Card Fees: $7.30
(2.4%)
Percent: 2.395%
Per-Item: $0.11
In 2007 Southwest Airlines paid $216,000,000 in credit card processing fees (details) - enough to buy 54 MILLION gallons of jet fuel.
More Info
Interchange Category: T&E;
| Breakdown of Fees |
| Mbna America Bank: | $7.00 |
| Mastercard: | $0.28 |
| Processing Company: | $0.01 |
Airlines often get special pricing for Credit Card Processing.
Their rates tend to be slightly lower than retail rates.
Flatscreen TV at Electronics Depot: $800.00
Credit Card Fees: $14.71
(1.8%)
Percent: 1.825%
Per-Item: $0.11
If everyone used your Credit Card, Best Buy might pay $735,922,912 in fees each year!
More Info
Interchange Category: Merit III
| Breakdown of Fees |
| Mbna America Bank: | $13.94 |
| Mastercard: | $0.76 |
| Processing Company: | $0.01 |
Retail stores such as BestBuy get lowered Interchange
rates, as long as they swipe your credit card in-person.
Typical total rates for a large purchase such as a new HD TV would be 1.825%.
For large purchases like this, the per-item fee is much less significant to the merchant than the percentage-based fee.
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