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.

Comments

Totally not collusion

[Anonymous Coward]

Definitely not collusion

Re:Totally not collusion

[Dutch Gun]

Oh, come on. It's totally a coincidence that both would raise their rates at the exact same time, right?

Recently, the two companies along with several U.S. banks, had to pay over $6 billion to settle a lawsuit brought by merchants who accused the credit card companies of violating federal antitrust laws by forcing merchants to pay swipe fees and prohibiting them from directing consumers toward other methods of payment.

How shocking. Gosh, if you can't trust a giant, international credit merchant, who CAN you trust these days?

Re:Totally not collusion

[ShanghaiBill]

The problem is that the customer makes the decision on which card to use, but the merchant pays the fee, and is banned from passing the fee onto the customer. So Visa and MC have no incentive to lower fees, since there is no incentive for the decision maker to care.

The solution is to ban the ban. Merchants should be able to pass on the fee. If customers can see that Visa costs them an extra 3% on their bill, while AmEx costs them 4%, that will be the end of AmEx. It will also open up competition for lower rates from alternative payment systems. Discover Card had lower rates, but it never caught on because the lower rates didn't actually benefit the customer.

This is similar to healthcare. The insurance company pays, not the patient, so the person making the decision has no incentive to care about the cost. The obvious result is spiraling prices.

Re:Totally not collusion

[Solandri]

While a cash discount can cancel out the average credit card transaction fee, it does not allow for distinction between different fees for different credit cards. So the problem OP pointed out remains - there is no incentive for customers to prefer cards with lower fees over others. That is arguably the reason why the ban is crafted with such an "obvious loophole." Because the loophole seems to make the ban ineffective, when in fact the purpose of the ban is to prohibit competition between different credit cards. Not between credit cards vs cash.

Re: Totally not collusion

[saloomy]

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.

Saturate the market

[Anonymous Coward]

When you saturate the market to the point where you can't grow anymore, you got to raise prices. Their cost of doing business hasn't gone up, so there's no real reason to raise prices other than to appease Wall Street.

Re:Saturate the market

[Freischutz]

When you saturate the market to the point where you can't grow anymore, you got to raise prices. Their cost of doing business hasn't gone up, so there's no real reason to raise prices other than to appease Wall Street.

Wall Street: A bunch of greedy sociopaths with a sprinkling of hallucinating schizophrenics (also known as 'market analysts') thrown in.

Watch out Visa

[Anonymous Coward]

Google or Amazon could end you. It could happen fast and bad. All that's needed is a nudge, and raising merchant fees could be just that.

They should be lowering fees as an attempt to stave off the inevitable.

Re:Watch out Visa

[I'm just joshin]

If PP charged lower merchant fees, they might. But they don't. So they haven't.

Re:Consumers will pay for this

[chemish]

Can't be done. Visa, Mastercard, and Amex all have clauses forbidding those cash discounts, which can cause a merchant's account to be pulled.

I'm pretty sure it can be done you just have to do it the right way. I see places all the time offer a ~2% cash discount but what you can't do is add on a 2% credit card fee.

Right

[Dasher42]

I'm sure with the state of technology and all, the costs to keep track of these records are rising and the credit card companies are just keeping up.

Re:Consumers will pay for this

[Anonymous Coward]

Nope. That was outlawed in 2010 with the Dodd-Frank bill. They can and do offer cash discounts.

Re:Consumers will pay for this

[SlaveToTheGrind]

Can't be done. Visa, Mastercard, and Amex all have clauses forbidding those cash discounts, which can cause a merchant's account to be pulled.

This is a well-worn urban myth. Merchants absolutely can and do offer discounts for paying with cash -- what they can't do is impose a surcharge for paying with a card. Here's a recent article where Visa explains the difference.

Because the cost is hidden.

[Gravis Zero]

The reason they can do this is because the cost is being hidden from the consumer. Do you think someone would sign up for getting "2% cashback" if they were paying 2.1% more per transaction? Nope and yet that is what is happening. The cause of this is that stores are contractually required to eat the cost of the transaction fees and thus increase the price of goods to compensate. The result is that everyone is subsidizing the transaction fees, even if they pay cash which completely eliminates any desire to compete with lower transaction fees. Pass a law legally compelling stores to isolate the cost of the transaction from the goods themselves and the transaction fees will plummet because then credit card companies will have to compete for consumers.

If you are in favor the free market then you cannot be in favor of the actions of credit card companies.

Re:Consumers will pay for this

[monkeyxpress]

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.

Simple solution

[fred6666]

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.

By all means raise those rates

[WaffleMonster]

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.