Visa and Mastercard Will Increase Fees Next Month
Visa and Mastercard will soon increase fees that many large merchants pay when they accept consumer credit cards. The fee increase was announced a long time ago but was delayed for more than two years due to the pandemic.
Now the two companies are expected to go ahead with their plans and increase fees next month, according to people familiar with the matter and a document seen by WSJ.
Interchange fees are set by card networks, and paid by merchants when shoppers use their cards. The fee goes to the bank that issued the card. These fees have increased tremendously in recent years as more people use rewards credit cards, which typically come with higher fees for merchants. Merchants have to accept rewards credit cards, because Visa or Mastercard do not allow them to pick and choose which cards they can accept in their networks. It’s all or nothing.
U.S. merchants paid card issuers about $55.4 billion in interchange fees on Visa and Mastercard credit cards in 2021. That’s more than double the amount in 2012. Even though these fees are paid by merchants, they obviously pass some of these costs to the consumer in the form of higher prices. And you have probably noticed the trend of merchants adding on additional fees for customers who pay with a credit card.
The Visa and Mastercard fee increases will apply to many online credit card purchases, according to the document and people familiar with the matter. Mastercard will also raise fees on more than a dozen categories of in-store purchases. Small and medium sized supermarkets will pay higher interchange fees on most rewards cards, WSJ reports.
But both companies point out that some fees will be decreased. A Mastercard spokesperson said the company is reducing costs for all merchants transacting less than $5, as well as hotels, casual dining, daycares and other industries hit hard by the pandemic. Visa is reducing fees for online and in-store purchases at certain small merchants with annual credit card volume of $250,000 or less. Visa said the change would lower fees by 10% for more than 90% of American businesses.
