Visa and Mastercard merchant fees have been reduced, which means merchants will be able to pay less for card fees. But consumers should be wary, as they may pay more depending on the type of credit card they use.
Credit card giants Visa and Mastercard and the banks that issue them have settled a nearly 20-year-old antitrust lawsuit brought by merchants.
Under the settlement announced on March 26, Visa and Mastercard will reduce merchant fees by at least 0.04 percentage points and maintain the rates for five years.
It is estimated that merchants will save up to $30 billion in fees over five years.
Merchant fees are typically around 2% of the payment amount but can be as high as 4% for some premium rewards cards.
Merchant fees, which are determined by credit card companies, are paid by merchants to card-issuing banks each time a consumer purchases goods and services with a card, and merchants have long wanted to be able to negotiate fees directly with banks.
Visa, Mastercard, and banks collected $72 billion in merchant fees last year, according to a Nielsen report.
The settlement also includes allowing merchants to steer consumers toward lower-fee credit cards to give them more choice in accepting cards and allowing small businesses to form groups to negotiate fees, just as the big companies do.
Each card has different fee rates, although they are issued by the same credit card company. Currently, merchants can’t steer consumers to lower-fee cards.
The settlement still needs final approval from the U.S. District Court for the Eastern District of New York before it can be implemented.
However, Doug Kantor, general counsel of the National Association of Convenience Stores, said “The settlement dropped without the fact that merchants are not going to like it. There’s likely to be lots of opposition to it.”
Stephanie Martz, chief administrative officer and general counsel of the National Retail Federation (NRF), said, “The unfair business practice will remain to harm merchants, and the range of reduction will only amount to pennies on the dollar.”
On the consumer side, experts say that depending on which credit card they have, they could end up paying more in fees.
According to Business Insider, a statement from a legal representative for the merchants said they “will be able to adjust their pricing based on the costs associated with accepting various credit card payments.”
This means that customers who pay with higher-fee credit cards, such as premium cards with lots of points or perks, may have to pay higher prices than others.
Regarding the settlement, Visa said it made meaningful concessions to small businesses, while Mastercard said the settlement would end the litigation and provide value to business owners.
BY NAKI PARK, HOONSIK WOO [park.naki@koreadaily.com]
