Are the new chip-and-pin card readers a scam to line pockets of big payment processors at the expense of merchants and consumers?

That's the troubling question raised by a recent investigation by the Chicago Tribune, which reported that some merchants are paying fees on debit card transactions as high as 20%, usually when the card is issued by a smaller bank and the cardholder verifies with a signature instead of a PIN.

Why are transaction fees so high? There are 3 factors that affect how much merchants must pay when consumers use a chip-and-pin card: which bank issues the card, whether consumers verify with a PIN or a signature, and which payment processor handles the transaction.

1. About 1 in 3 debit cards are issued by small banks with less than $10 billion in assets. Under an amendment to the Dodd-Frank Act of 2010, transaction fees on cards issued by small banks aren't capped like those of big banks. So if your card is issued by a smaller bank, merchants end up paying much higher transaction fees whenever you buy something.

2. The second factor is whether you verify the transaction with a PIN or a signature. When consumers choose to verify with a signature, the transaction fee goes up to cover the increased risk of fraud. It's a lot easier for fraudsters to fake a signature than steal a PIN number, so payment processors charge higher fees to cover the risk.

But according to merchants, sometimes cardholders don't have any choice about whether to use a signature or a PIN to complete a transaction. Many of the new chip-and-PIN readers are configured by default to ask for a signature, which is the most expensive verification option for merchants and the most profitable for payment processors, instead of the cheaper and safer PIN option.

Even large merchants like Walmart are getting hit by the higher transaction fees. The world's biggest retailer is now suing Visa for allegedly forcing customers to verify transactions with a signature rather than a PIN.

3. The third factor is the payment processor. The senior VP of the National Retail Federation, Mallory Duncan, told the Chicago Tribune that many of the new chip-and-PIN terminals are set up by default to use Visa or Mastercard's networks, which charge some of the highest transaction fees.

When consumers are presented with a list of payment processors, it's usually either Visa, Mastercard, or something called U.S. Debit. Because most consumers don't know what U.S. Debit is, they usually pick either Visa or Mastercard, or whichever logo is on the card they're using.

What most cardholders don't know is that U.S. Debit links to smaller payment networks like NYCE, which typically charge far lower transaction fees than Visa or Mastercard.

The average fee charged to the merchant when consumers select a smaller payment network like NYCE is about 25 cents. Visa and Mastercard, on the other hand, charge merchants anywhere from 1% to 2% of the transaction amount.

Mastercard and Visa say they don't force merchants or consumers to use their networks, and that most consumers pick them because of brand recognition. But when merchants have to pay higher transaction fees, there's only one thing they can do: pass the costs onto the consumer with higher prices.