A recent report claims that Visa and Mastercard are planning to increase merchant credit card fees. If this comes to pass, merchants could end up having to pay another half a billion dollars per year, according to the report.
The new fee hike is supposed to come in October, which will be followed by another one in April next year. According to Wall Street Journal’s sources and documents, most of these raises will target online transactions.
Mastercard denies the rumors
Since the rumor emerged, a consulting company called CMSPI shared its thoughts on the matter. According to the firm’s calculations, the rises could increase merchants’ costs by another $502 million per year. Last year, merchants in the US had to pay $93 billion in credit card fees charged by the two card issuers.
As a result, both card giants saw their shares increase in value by over 1% each. Then, in March 2023, the US federal appeals court upheld an antitrust class-action settlement worth $5.6 billion. The case spans almost 20 years and revolves around 12 million retailers who sued the card giants over interchange fees.
Since the WSJ story came out, many have reached out to Mastercard and Visa for a comment. According to Mastercard’s spokesperson, the report published by WSJ is “not correct.” They said: “We were clear on two points before the story was filed — there are no changes to Mastercard interchange rates, and the one Mastercard ‘change’ referenced is an existing service we provide to acquirers, who can activate it as needed to drive a safer and more streamlined checkout experience for consumers.”
As of the time of writing, Visa has not commented on the matter.
Block lawsuit targets Visa and Mastercard
Another recent development involving both credit card giants is an antitrust lawsuit filed in July by Block, which owns the payments platform Square. Also, the lawsuit was based on the use of interchange fees, as Block said that the companies are conspiring to increase their fees and inflate retail prices.
Block’s lawsuit said that the effect of the inflated fees is higher retail prices paid by consumers economy-wide. In other words, if merchants end up having to pay more, they will solve the problem by increasing the prices of their products, which means that consumers are the ones who will end up having to pay more money.
However, Block also complained that the companies are purposefully making their fee structures highly complex to make them difficult to calculate. On top of that, they are currently completely unavoidable.
Both Mastercard and Visa have argued in the past that the fees help offset the cost of fraud prevention and innovation, which is also an argument commonly used by banks. The banks use the money they get from interchange fees to pay for credit card reward programs. Additionally, new research by PYMNTS and Elan Credit Card indicates that consumers have been using cards more and more since the rise of inflation.