The aim is to reduce costs for both retailers and consumer, and to help create an EU-wide payments market. The regulation will also help users make more informed choices about payment instruments.
Interchange fees are charged by a cardholder’s bank to a retailer’s bank every time a consumer makes a card-based purchase. While consumers are often unaware of such fees, they cost retailers and ultimately consumers tens of billions of euros every year. The level of the fees varies widely from one member state to another, creating barriers to the EU internal market.
They do not impact consumers directly, though they can affect consumers indirectly through higher prices and a lower willingness by some retailers to accept card payments.
Caps for debit and credit cards
The following maximum levels for interchange fees will apply as from 6 months after entry into force of the regulation:
- for all credit card transactions, 0.3% of the value of the transaction;
- for all debit card transactions, 0.2% of the value of the transaction. However, for domestic debit card transactions, member states may allow a per transaction interchange fee of no more than 5 eurocents in combination with the 0.2% cap. They can do this provided that the sum of interchange fees of the payment card scheme does not exceed 0,2% of the annual transaction value of domestic debit card transactions within each payment card scheme. Moreover, during the first five years of application, member states may apply the 0,2% cap calculated as an annual weighted average of all domestic debit card transactions within each payment card scheme;
- For domestic payment transactions that are not distinguishable as debit or credit card transactions (“universal cards” transactions), the same cap as that provided for domestic debit cards transactions. However, during the first year of application of the caps, member states may define up to 30% of the domestic “universal cards” transactions as credit card transactions to which the interchange fee cap of 0.3% of the value of the transaction would apply.
The new rules will encourage competition and make it easier for new entrants to join the market, leading to broader availability of payment instruments.
Transparent mechanisms will allow retailers to be aware of the level of fees paid when accepting cards. The new rules will enable them to more easily select which payment cards to accept.
Card schemes are often designed to convince banks to issue their cards by letting them charge higher fees. Retailers pass on their costs for accepting card payments to their customers by raising prices. In certain payment card schemes, which are run by associations of banks, interchange fees are agreed multilaterally by member banks.