Whether you use a credit or debit card or not, you pay a hidden fee on virtually every transaction you make. These fees have an inflationary effect and they really add up. They cost European shoppers tens of billions of Euros every year.
How does it work?
Every time you use a Visa or MasterCard to pay at a shop or restaurant or petrol station, you’re not only paying for your goods or services, but you’re also paying a hidden fee to the banks. Why hidden? Because Visa and MasterCard set the fee secretly each year together with the banks that hide behind the respective card schemes. The fee, called interchange, works out roughly to be a certain percentage of each transaction that Visa and MasterCard banks collect from shops and businesses each time you use a credit or debit card to pay for a purchase.
In some places in Europe, the fee can amount to as much as 3 percent or more. So for every €100 you spend, you could be paying €3 directly into the pockets of Visa or MasterCard and the banks behind them.
Have a look at the diagram below - how it works in practice. Start off on the bottom left as the cardholder purchasing something for €100. Follow the arrows all around until you get to the retailer and you’ll start to get the full picture. If you follow the arrows up to the top right, you’ll see that the retailer’s bank (known as the acquirer) levies a fee for this transaction to the retailer of €3. This bank keeps €1 to cover the processing cost and profit, and sends the second bank (card holder’s bank) €2, which is a fee this bank levies on the transaction. The fee charged by the cardholder’s bank is known as the interchange fee and is decided behind the scenes, either by Visa or MasterCard or by the banks hiding behind them – all without input by retailers or shoppers, and often without their knowledge.
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