Visa U.S.A. announced Thursday an overhaul of its signature debit interchange pricing that includes major reductions across the board plus lower rates for high-volume merchants.
The new rates will be as much as 53% lower than those in force before the Wal-Mart settlement, and in most categories they will be lower than comparable credit card rates, the card association said.
“Visa is restructuring and modifying its offline debit interchange reimbursement fees” to reflect merchants’ new options, William Sheedy, Visa’s executi ve vice president of interchange, wrote in a brief to members.
On Jan. 1 merchants accepting Visa’s and MasterCard’s credit cards will be allowed to decline their debit cards. The new rates will go into effect Jan. 31. Until then the rates adopted in August in accord with the settlement will be maintained. Those rates reflected a cut of about one-third.
Mr. Sheedy said that merchants feel obliged to accept credit cards because they tend to be used for big purchases. Merchants may need more incentive to keep taking debit cards, he said.
Visa will offer four pricing tiers, according to the number of signature debit transactions a merchant produces, total transaction value, and the merchant’s chargeback and fraud ratios. There are only two pricing tiers for credit cards.
To get the best pricing, merchants must produce at least 35 million offline debit transactions totaling $2 billion a year and must meet certain chargeback and fraud-ratio targets.
The rate for this top retail debit category will drop from 1.25% of the transaction value to 0.70%, but its per-transaction fee will rise to 15 cents. The change favors larger purchases. The comparable credit card rate is 1.39% plus 10 cents.
Even retailers that do not reach any of the volume discount thresholds get a break in rates, which will dip from to 1.05% from 1.25%. The saving will be offset somewhat, however, by an identical hike in the per-transaction fee, to 15 cents from 10 cents.
The biggest price breaks go to emerging categories like automatic bill payment, self-service gas stations, and restaurants. Rates on purchases at the gas pump will drop from 1.50% to 0.70%, though the per-transaction fee will jump to 17 cents from 5 cents. Mr. Sheedy said that reflected merchant requests that the fee be based more on per-transaction charges because motor fuel prices change so much.
Mr. Sheedy said some could opt out of the system and negotiate rates. He would not say whether Wal-Mart Stores Inc., Visa’s largest merchant, had done so to obtain its recent agreement.
