Visa and Mastercard plan to raise fees next April

Visa and master card, financial services companies, have decided increase their rates for next April in the United States, something they have already wanted to do in the past and had to delay due to the pandemic.

This rate increase will mean a slight increase in prices. Also, some merchants already include an extra charge when making a card payment. It will be in the big merchants where this price growth will be noticed. The largest increases will come from transactions made with airline premium cards and purchases in small and medium-sized supermarketsaccording to the payment consultant CMSPI. According to the same, the changes will increase the rates in 475 million dollars.

US retailers have applied through the Merchants Payment Coalitions that Federal Trade Commission (FTC) and the Department of Justice (DOJ) research credit card fees. While Mastercard and Visa have explained to the Wall Street Journal that this increase would be necessary to cover the costs related to innovation and fraud prevention, since payments through cards increased considerably during the pandemic.

What are transaction fees?

Transaction fees are a additional surcharge that is included in the invoice when a purchase is made from a foreign merchant. They are mainly used to prevent fraud and ensure security. According to a report by eMarketer, card spending accounts for about 8 out of every 10 dollars spent across all channels.

However, there is a problem and it is that this expense has skyrocketed as the use of the card increases. Visa and Mastercard commercial rates reached an estimated price of 55 billion dollars last year, more than double the total for 2012, reports The Nilson Report. For this reason, eMarketer states that four aspects must be taken into account:

  1. Merchant Rejection: big sellers with bargaining power can take action on their own. Such is the case with Amazon, which explored surcharges and even a ban on Visa cards in several international markets.
  2. Regulation: The Merchant Payments Coalition (MPC) is lobbying the US Congress to ban the rate increases.
  3. Surcharge: Several merchants are starting to charge customers up to 4% to offset card fees and avoid jacking up prices.
  4. Alternatives: Merchants can adopt other alternatives to card payments such as account-to-account (A2A) offers.
Source: eMarketer

Could these rates increase in Europe?

Visa and Mastercard in the European Union cannot raise rates, because in 2015 a limit was agreed. This legislation increases the transparency of fees, thereby letting retailers know the level of fees being paid when accepting cards. Among the regulations of this law we find:

  • ANDestablishes the maximum limits applicable to interchange fees 0.2% of the value of the transaction for individual debit cards and 0.3% for individual credit cards;
  • in relation to individual credit cards, it allows EU countries to define percentage limits of less than 0.3%;
  • in relation to private debit card operations, it allows EU countries to impose a fee of no more than five euro cents per transaction interchange fee, in combination with the 0.2% limit;
  • set a limited number of exemptionssuch as company cards that are used solely to cover business expenses are charged directly to the company account;
  • it increases the transparency of the level of fees paid by retailers, thus allowing them to more easily choose the payment cards they will accept.
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