Visa and Mastercard, the top two payment networks in the U.S., are set to raise their credit-card fees which merchants pay when customers use the credit cards for transactions, according to The Wall Street Journal report on Thursday. Though these charges are generally borne by merchants themselves, a small portion of it is transferred to customers.
The fee rise is reportedly expected to set in from October for online transactions and April for commercial credit, debit and prepaid cards, with online purchases being the most affected by these increased fees.
This fee rise could lead to merchants ending up paying an additional $500 million annually in fees, according to advisory firm CMSPI. More than 50 percent of the increased fees will be derived from network charge increases and the balance from increases in interchange fees such as swipe fees.
The fees merchants pay have always been a pain point in the relationship between card networks and merchants ranging from huge establishments and large internet retailers to small time merchants and coffee shops.
There has already been a three-fold increase in these merchant fees over the past decade. U.S. businesses spent about $126 billion on all types of credit-card fees in 2022, up 20.2 percent from 2021, according to the Nilson report.
The banks reportedly argue that this increase in fees would enable them to offset the increasing costs related to credit-card fraud prevention and innovation. They also use these fees to pay for credit-card rewards programs, which in turn increases the volume at merchants.
Most of the retailers will experience increased costs, which will ultimately affect the customer, who is already dealing with the highest inflation in four decades. Meanwhile, the small merchants will be the most hit as the large global retailers generally ink global deals to trim credit-card fees.
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