Payments News

Merchants now pay more in credit-card swipe fees than customers pay for overdrafts

Sep 07, 2017

Credit-card interchange fees have doubled over the last eight years

There’s good reason why banks are pushing the latest flashy credit card.

For the first time ever, credit-card interchange fees, the amount a merchant pays card networks every time a customer uses a credit card to make a purchase, have exceeded the amount customers pay in overdraft fees. Total overdraft fees totaled $33.3 billion in 2016, just shy of the $33.8 billion financial institutions collected in credit-card interchange fees, according to a new analysis of service fees from Moebs Services, a Lake Forest, Ill.-based firm that researches financial institutions.

Overdraft revenue is up only slightly, but still down from its peak of $37.1 billion in 2009 as banks have been required to get customer consent to opt into overdraft facilities since 2010 and customers shy away from higher overdraft charges. In sharp contrast, interchange fees have more than doubled from $18.5 billion eight years ago. The increase in these fees, particularly those shouldered by merchants, represents a “major shift” in how banks, credit unions and other financial institutions have collected fees in the last several decades, said Michael Moebs, an economist and chief executive of Moebs Services.

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