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Visa, Mastercard Mull Increasing Fees For Processing Transactions: Report (reuters.com)
Visa and Mastercard, the two biggest U.S. card networks, are preparing to increase certain fees levied on U.S. merchants for processing transactions that will kick in this April, the Wall Street Journal reported on Friday, citing people familiar with the matter. From a report: Some of the changes relate to so-called interchange fees, the report said. Interchange fees are what merchants pay to banks when consumers use a credit or a debit card to make a purchase from their store. Fees that Mastercard and Visa charge financial institutions, such as banks, for processing card payments on behalf of merchants are also set to increase, the report said.
They tried to do this in New Zealand, with a few businesses adding surcharges for using a credit card (when laws were changed to stop credit card companies from preventing this in contracts) and basically the card companies ran media campaigns portraying the businesses as greedy. It worked really well, and the businesses had to backtrack.
The reality is that the payment card industry is pure genius. They offer endless freebies to card holders, which makes card holders think these companies are their best friends, and then make the customers pay for it all through payment charges. But when a retailer tries to pass these fees on to the customer, the customer gets annoyed because they want all their 'free' stuff by being able to pay with the card, rather than having to use cash. It sort of relies on a level of collective stupidity that is probably impossible to eradicate from society.
This, merchants will just pass the cost increase on to the customer. All customers, since it would be too much work to offer a discount to cash customers. In fact it should be the other way around, card users incur a fee - but that would be bad for business - best to just hide it in higher prices for every one like they already do. As a cash customer, this stinks.
This is an obvious case where government intervention is required. To limit the fees the oligopoly can charge.
It has been done in Australia and other places. Visa and Mastercard threatened to leave the country. They didn't.
Sooner US market gets pissed off enough at visa/mc duopoly with their in your face brazen market collusion and security nightmare 'take' rather than 'give' models and instead move to something half way rational like SWIFT instant payments the better off we will all be.
I have a business which process most purchases through credit cards a and I can tell you, it is almost impossible to determine at time of purchase what the fees will actually be. There are interchange fees and processing fees and they vary not only between Amex and Visa, but also what type of rewards program the card uses, and what bank the card is issued by. Amex cards issued by banks like a Citi Amex cards are billed different than Amex cards alone.