NACS: Visa’s Move to Reduce Debit Holds a “Smokescreen”

With retailers and consumers struggling from the card companies’ policy of placing excessive holds on credit- and debit-card transactions at the fuel pumps, Visa announced a plan to reduce hold times to just a couple of hours.

Right now, issuing banks impose a hold on funds in their customers’ bank accounts for an amount exceeding what has been spent on gas. These debit holds can last up to three days.

By October, gas stations will be able to use a "Real Time Clearing" procedure where Visa debit card transactions clear in two hours or less.

The National Association of Convenience Stores (NACS) and the Merchants Payments Coalition (MPC), however, challenged the move. "If Visa is willing to admit that interchange fees are causing added pain at the pump, why won’t it admit its role in rising food and other consumer prices," the groups said in a joint statement. "Interchange fees cost Americans $42 billion last year – more than all other credit card fees combined. It inflates the cost of nearly everything consumers purchase whether they pay with plastic or cash."

Hank Armour, president and CEO of NACS, said it could take months for the industry to realize the full impact of Visa’s decision, since Visa said this will only affect debit card transactions on gasoline in mid-July and won’t affect credit card transactions until October, long after the end of the summer driving season.

"While the devil is always in the details and we haven’t seen any details yet, it looks like the new structure for credit cards combines a higher fixed fee with a lower percentage fee," Armour said. "The net result of this combination may actually be higher fees for those transactions under $60 for those customers using regular Visa credit cards without a rewards program."


Capped Out

On debit card transactions, the cap on interchange may only apply to gasoline purchases of more than $97.50. That’s a small number of transactions, especially when Visa banks reserve the right to give gasoline retailers nothing more than $75 on a sale. Drivers who want to exceed that $75 on a Visa or MasterCard at a capped pump must make two transactions, each time inserting their card, lifting the nozzle and choosing the grade of gas. Or they can pay the cashier in the store.

Scott Hartman, president of Pennsylvania-based Rutter’s Farm Stores, blamed MasterCard and Visa for imposing an inconvenience on motorists and merchants. "It’s become a huge issue for the industry as the price of gas is rising," he said.

MasterCard and Visa are making money by forcing two transactions at the pump, Hartman said, because they get a base fee and percentage every time a card is used.

As part of Visa "Real Time Clearing" procedure, when a customer swipes a debit card at the pump, an estimated purchase amount based on the gas station’s average transaction will be authorized. After the customer finishes pumping gas and the actual purchase amount is determined, the customer’s bank will have up to two hours to release any frozen funds. VISA said most transactions will clear in real time, usually less than 15 minutes.

NACS said it welcomes "any recognition by Visa of the interchange fee pain, the confusion and potential negative effects of these changes might have been avoided if this were the result of a negotiation between merchants and Visa." The association is pushing H.R. 5546 and S. 3086, the Credit Card Fair Fee Act, which would allow that to happen.

"This was a carefully crafted public relations strategy designed to mislead the media and Congress," said Jeff Lenard, NACS vice president of communications. "We have heard from a number of retailers who have gone through the numbers that this will increase fees for smaller and medium sized transactions. The only thing that this announcement accomplishes is that Visa has publicly acknowledged that there is a problem. However, this is a typical smokescreen that does nothing to change the current structure, which is broken. The problem remains that Visa is allowed to fix rate in secrecy."


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