Credit Card Companies Find a Way to Compensate Themselves for Changes in Fees

Leumi Card and Cal have both announced higher fees for thousands of small merchants.

Tal Cohen

Credit card companies seem to be in no rush to lose out on some of their revenues.

Last week the Bank of Israel announced it was eliminating a number of credit card fees the companies charge customers, but Leumi Card and Cal - Israel Credit Cards have since both announced higher fees for thousands of small merchants.

Cal has raised its clearing fees to 2% of the total charge, and its Yatzil Finance subsidiary also announced higher settlement fees.

Bank Hapoalim’s Isracard subsidiary is still the most expensive for small business clearing fees, say industry sources.

There were hopes that the law requring the opening of the clearing business for Isracard credit cards would lead to increased competiton and lower fees. But in practice what has happened is that large businesses have succeeded in pressuring the credit card issuers to lower their fees — and in response the companies have compensated themselves by raising fees to small businesses.

The timing of Leumi Card and Cal’s move is a bit surprising since the cross clearing fees — the fee the clearing company pays the issuer of the credit card — the companies must pay will actually go down from 0.735% to 0.7% on July 1.

Cal told the merchants the new agreement replaces any and all prior ones - which means Cal can change its agreement unilaterally and at any time it wants; and only serves to highlight the imbalance of power in the credit card business.

The Supervisor of Banks in the Bank of Israel, David Zaken, announced he was eliminating a long list of fees last week, including minimum fees for merchants, fees for opening an account, for changing account information and for installment payments, among others. .

In addition, the credit card companies were told to present a standard list of fees and tariffs so customers and businesses could more easily compare prices between the companies.

Leumi Cards said that it changes the pricing of its services from time to time, and “in any case it makes sure to remain competitive and attractive to the customer.”

Cal said the clearing fee was an essential part of its business activities, and as part of its regular operations it examines the levels of the fees. Some businesses saw fees lowered and others were charged more based on the company’s commercial considerations, which are confidential.

“The raising of clearing fees by the credit card companies was done in accordance with the clearing agreement between the merchant, and subject to legal requirements,” the spokesman for the Supervisor of Banks said.