Fee Hikes on the Horizon for Mastercard and Visa

Fees Set to Rise Next Month

After postponing fee increases during the pandemic, both Visa (V) and Mastercard (MA) plan to raise fees charged to some large merchants when consumers pay by credit card. These charges, known as interchange fees, have swelled over the last decade — with a whopping $55.4 billion paid by merchants in 2021. The bank that issued the card receives the money.

Larger merchants will bear the brunt of the new fees. Each payment network will exempt certain spending categories such as daycare, restaurants, and hotels. Additionally, smaller merchants may even see fee reductions with the introduction of the new rate structure. Mastercard also plans to lower transaction costs on purchases under $5.

Credit Card Companies’ Rationale

Visa and Mastercard (claim the increases are necessary to help cover the costs associated with rewards credit cards. They also point to expenses tied into fraud prevention. This includes the fact Visa offers a lower fee rate for merchants who use its service to hide or protect consumers’ card numbers.

CMSPI, a consultant to merchants, estimates fee changes will provide Mastercard with a $330 million bump in annual fee revenue from merchants. The requirement that networks “honor all cards” should ensure the payment networks realize a higher revenue stream from rewards cards.

Consumers May Pay More When Using Credit

Consumers may end up facing a surcharge in response to this move as merchants attempt to pass on the higher fees. Retailers could also try to recoup some of the costs by raising prices. Either way, consumers face a potential hit to their wallets.

The extra costs could dampen enthusiasm for online shopping, which exploded during the pandemic. These fees may also prompt shoppers to rethink their form of payment preferences. Visa and Mastercard are hoping for a windfall — especially with people carrying less cash these days.

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