Debit card fee fight delayed until March
By Lucy Lazarony • Bankrate.com

A retailers' rebellion against Visa U.S.A. has been delayed until March.

The stores, led by Wal-Mart and Walgreens Drug Stores, say the card association is going to more than double the fees it charges merchants, and that those fees would have to be passed on to their customers.

Rather than pay the fees, the stores will refuse to accept PIN-based debit card purchases processed through Visa's Interlink network.

The Interlink lockout was set to begin Oct. 13. But on Oct. 5, Visa U.S.A. announced that it would postpone its fee increase until March 2002. Visa officials cited technical difficulties, the weak economy and the merchants' concerns in announcing the delay.

Both Wal-Mart and Walgreens say they will continue to accept debit cards processed through Interlink until the new fees kick in.

But come March, some debit card customers won't be able to use their cards at Wal-Mart and Walgreen.

"There may be some short-term inconvenience for some of our customers, but we feel they will be better off in the long run," says Michael Polzin, a spokesman for Walgreen.

More than 60 million consumers carry a debit card with the Interlink logo. However, many of those debit cards have links to more than one debit card network.

Interlink lockout
Only debit cards processed exclusively by Interlink, such as Bank of America debit cards, will be affected by the lockout.

If the back of your debit card says Interlink, and Interlink only, you will not be able to make a PIN-based debit card purchase or get cash back at Wal-Mart, Walgreens or the other participating retailers.

You will still be able to make a signature-based debit purchase with the card as long as it has a Visa or MasterCard logo on the front.

If there's no Visa or MasterCard logo on the card, you will not be able to use it at those stores.

Remember that PLUS and Cirrus are ATM networks. A Plus or Cirrus logo on the back of a debit card has no bearing on whether you can use it.

Other merchants participating in the Interlink lockout include Publix supermarkets with 673 stores in the Southeast, Aldi supermarkets with 580 stores in the Midwest, and RaceTrac gas stations and convenience stores with 500 locations in the Southeast.

Representatives for Publix, Aldi and RaceTrac could not be reached for comment.

Walgreens, the nation's largest drugstore chain, operates 3,520 stores in 43 states. Wal-Mart has more than 2,700 discount stores nationwide. Both Walgreens and Wal-Mart estimate that less than 10 percent of their debit card transactions are processed through Visa's Interlink.

All the retailers will continue to accept credit cards.

"Credit card transactions are not affected at all," Polzin says. "So if you have a Visa credit card, we'll accept that. It has nothing to do with credit cards."

The retailers also will continue to accept PIN-based debit card transactions processed through debit card networks such as Star, Pulse, NYCE and AFFN.

If any of these networks are listed on the back of your debit card, you'll be able to swipe your card and pay by PIN and get cash back at the participating retailers.

However, cards such as the Bank of America's 22 million debit cards that are linked to a single debit card network will be shut out.

As of Oct. 8, Bank of America debit cards, excluding cards issued to customers living in Texas and Iowa, will be exclusively linked to Visa's Interlink network, according to spokesman Brad Russell. New cards will be sent to customers over the next four to five months.

The 18 million customers that have a Visa logo on the front of their debit card will still be able to make signature-based purchases with the card.

All they have to do is swipe their debit card, press the "credit" button when prompted, and sign the sales slip.

"It should have minimal customer impact because the option of depressing the credit function is still there," Russell says.

Of course, the Interlink lockout won't seem so minimal if your Bank of America card doesn't have a Visa logo and you can't use it. Four million Bank of America customers won't be able to use their debit cards at Wal-Mart, Walgreen and other participating retailers.

Fighting over fees
The battle between the retailers and Visa U.S.A. is over fees.

Each time a customer pays with a debit card, the merchant pays a fee to the debit card network that processes the transaction.

In June, Visa U.S.A's board of directors voted to increase the fees its Interlink network charges to merchants.

Visa U.S.A. would not reveal the amount of the increase.

The retailers say Interlink has more than doubled its fees. Rather than pay the fees, they're refusing to process cards through Interlink.

"There really was no economic justification for the increase. The end result would force retailers to pass on higher costs to customers," Polzin says.

"It's not in the best interest of our company or our customers to accept the card at the higher fee."

-- Updated: Oct. 11, 2001