The European
Parliament has approved a proposal for a Regulation on Interchange Fees for Card-based Payment Transactions. What is such an “interchange fee”? When a customer pays
for a purchase in a store using a credit or debit card, the bank that serves
the store (the "acquiring bank") pays a fee to the bank that issued
the payment card to the consumer (the "issuing bank"). The interchange
fee is then deducted from the final amount that the store merchant receives
from the acquiring bank for the transaction. The aim of the regulation is to
establish transparent fee-capping rules for cross-border and domestic retail
purchases, thereby reducing the amount of hidden fees for consumers. As a
general rule, the Regulation will cap interchange fees at 0.2% of the
transaction value for consumer debit cards and at 0.3% for consumer credit
cards. For domestic debit card transactions the 0.2% cap will only apply after
a five-year transition period. For smaller domestic debit card transactions,
Member States may also set a maximum fixed fee of €0.05 per transaction, after
the five-year transition period. For credit card transactions, likewise, Member
States may set a lower fee cap for domestic credit card transactions.
For now the new rules will
not apply to so-called “three-party” card schemes such as Diners and American
Express (involving only one bank) provided the card is both issued and
processed within the same scheme. Commercial cards used only to pay business
expenses will also be exempt.
The capping rules
do not affect ATM cash withdrawals.
What is next? The document is to be
endorsed by the Council of Ministers.
