ALBAWABA - After nearly two decades in court litigation, the two major credit card providers, Visa and Mastercard, have struck a deal with retailers and merchants to decrease interchange costs, in a $30 billion settlement of a class action lawsuit.
Whenever a customer buys with one of their credit cards, Visa or Mastercard charges a swipe fee, also known as an interchange cost, to complete the transaction, which it then splits with the banking institution who issued the card. Retailers pass such costs on to consumers by raising prices, thus why some discounts may be granted to those buying with cash.
Retailers have regularly accused Visa and Mastercard of imposing excessive swipe fees—which usually consist of minimal fixed fees in addition to a proportion of the sale's overall amount, averaging between 1.5% and 3.5% per transaction—when consumers use credit or debit cards, as reported by Reuters, as well as preventing them through "anti-steering" regulations from pushing consumers towards less expensive payment options.
Some critics argue that the recently revealed antitrust deal may not be sufficiently much, arguing that any savings would be transitory and charges would stay excessive. This settlement, which is among the biggest in US history, would address most allegations in a national case that started in 2005 should it get approved by the courts.
Stephanie Martz, the general attorney and chief administrative officer of the NRF, told CNN that the lower swipe fees which may result from the settlement won't significantly alter the landscape for retailers, saying that "The savings would amount to pennies on the dollar," adding that “The fact remains that these fees are an unfair business practice that harms merchants and consumers and benefits banks.”
Additionally, the settlement permits retailers to charge consumers more based on the type of Visa or Mastercard they use, according to CNN. Since incentives like cash back and airline miles often have greater swipe costs, the surcharges would probably affect cards which get such advantages.
Big Banks raked in $100 BILLION in swipe fees in 2023 on the backs of American families buying essentials like groceries and gas. It is past time to dismantle the Visa-Mastercard duopoly for Americans who are paying the highest swipe fees in the world. https://t.co/mmUaphKW9Y
— Dr. Roger Marshall (@RogerMarshallMD) March 21, 2024
However, as retailers would be able to work with banks to persuade customers to use whatever they prefer to be a favoured card, certain cardholders may get offers on products and services. At the moment, businesses who take Visa or Mastercard are required to take all their card types.
“This settlement achieves our goal of eliminating anticompetitive restraints and providing immediate and meaningful savings to all U.S. merchants, small and large,” Robert Eisler, co-lead counsel for the plaintiffs, said in a statement as reported by the New York Times.
