Card Companies to Raise Credit and Debit Card Fees

Visa and Mastercard to increase merchant fees starting in April.

February 21, 2019

ALEXANDRIA, Va. - Purchases with credit cards will cost more for both merchants and consumers when Visa and Mastercard boost certain debit- and credit-card fees starting in April, the Wall Street Journal reports.

The two biggest U.S. card networks announced that they’re hiking a range of fees that U.S. merchants pay to process transactions. Merchants paid an estimated $64 billion in Visa and Mastercard interchange fees last year, according to the Nilson Report, a payment industry publication. The 2018 payment figure is up 12% from a year earlier and up 77% from 2012.

The increased fees that Visa will put in place during the first four months of the year are estimated to cost U.S. merchants at least an additional $570 million through April 2020, according to estimates by CMSI, a merchants-payments consulting firm.

Some of the increases relate to “interchange fees,” which merchants pay to banks that issue the cards. Others are fees that card networks charge financial institutions for processing card payments on behalf of merchants.

Currently, 1% to 2.5% of the price for goods and services go to cover card fees. To protect their own profits, merchants might increase the prices consumers pay following such fee increases.

“Visa’s network fees are paid by our financial institution clients and used to enhance the safety, efficiency and innovation of our platform, and are set based on market conditions and to reflect the value we deliver,” a Visa spokesperson said, adding that Visa hasn’t increased fees in at least three years.

In some cases, returned merchandise purchased using Mastercard debit cards will become more expensive for stores, because in some transactions, merchants won’t be reimbursed for the interchange fee paid on the initial transaction.

Debit- and credit-card fees have been a long-running point of contention as shoppers move away from cash to cards. Merchants say card-company charges are exorbitant and that there is little they can do in the face of price increases.

Another complaint is that fees aren’t uniform. Some big merchants, including Amazon, Walmart and Costco, often pay lower fees due to the volume of transactions they handle. The card companies counter that the convenience of cards means more sales for merchants than would otherwise occur and that expenses tied to fraudulent card purchases and other costs must to be covered.

The pushback against card fees has been particularly pronounced outside the U.S. In recent years, interchange fees on debit and credit cards that are paid in many European countries have been lowered and capped. Visa and Mastercard recently reached a proposed settlement with European Union regulators to lower the interchange fees that merchants in the region pay on debit and credit cards issued outside of the area.

Large U.S. merchants, including Amazon, Target and Home Depot are pursuing litigation against Visa, Mastercard and large banks aimed at eventually lowering these fees.

In addition to advocating for congressional and regulatory intervention, NACS was a named plaintiff in a class action lawsuit against the credit card companies and their issuing banks on grounds of antitrust violations. NACS successfully advocated for the courts to reject the inadequate settlement that was reached in that case in 2012 and NACS continues to pursue reform through litigation. A new proposed settlement in that case was filed in September 2018. It only covers monetary compensation and does not limit the relief from Visa’s and MasterCard’s rules that merchants continue to seek in the litigation. NACS members can learn more about that settlement here.