Credit Or Debit?: The Visa/MasterCard settlement could save you money.

In this economy, every penny helps. Are you doing all you can to increase your bottom line?

If you’re unsure, one line item you could check is your interchange rates, the fees you pay to process debit and credit cards. They’ve changed, and mostly in your favor.

Yet many retailers don’t have the time or resources to ensure they’re getting the best rates. “In all fairness, I can’t compare apples to apples, because there are so many different angles, says Becker Surfboards Owner Dave Hollander. “We made all these agreements with a processor, and four months later I was still getting billed for things we couldn’t agree on. We fought that thing forever. The Becker organization has an information officer whose job includes policing rates charged by Becker’s processor.

But most shops don’t have that luxury. “Chances are you’re paying a higher rate than the rate Visa and MasterCard already charge, says Izabela Webber, relationship manager for Heartland Payment Systems, a credit-card processor. “Every industry has their tricks, and so does this one. Many processors don’t want the merchants to know the real costs.

Most of those costs should have already decreased. On June 5, Visa and MasterCard announced that they would pay three-billion dollars to retailers over ten years to settle a Wal-Mart-led class-action lawsuit to resolve a dispute over debit fees. They also agreed to reduce their interchange rates on debit cards by about a third. In the suit, merchants alleged that credit-card associations mandated they accept any Visa or MasterCard, whether it’s a credit card or debit card (signature- or PIN-verified), and signature-verified debit cards imposed higher costs. On August 1, new, lower interchange rates were implemented.

Per the settlement, Visa has agreed to reduce its interchange rates for its check card by .2 percent and ten cents per transaction, and MasterCard has agreed to reduce its debit rates by .46 percent.

That may sound minute, but those fractions of percents could add up to a substantial amount by year’s end. For example, let’s say your shop processes 20,000 dollars a month in Visa Check cards with an average ticket of 25 dollars. If your old rate was 1.79 percent plus ten cents per transaction, you’d pay a monthly processing fee of 438 dollars month. Under the new reduced rates, you should be paying only $318.40 to process the same amount of money. That’s a potential savings of $119.60 a month, or $1,435.20 a year.

Of course, these rates only apply if your processor passes the savings on to you. There’s nothing in the agreement that says processors must change their merchant pricing, but some processors such as Heartland have pledged to pass on the reduced rates to all of their 60,000 merchants, big or small. “Merchants have not been blessed with reductions very much in recent years, Heartland CFO Robert Baldwin told financial journal American Banker. “It’s the fair thing to do to pass it on.

To make up for lost revenue due to the reduced rates on debit-card transactions, both Visa and MasterCard have, predictably, increased their fees for credit-card transactions (and some credit cards impose higher fees than others, so beware). “The whole system is very cumbersome, and they do anything and everything to always charge more for a transaction, Weber says.