Visa and Mastercard Postpone Swipe Fee Increases
Update (Mar. 18, 2021) – Visa and Mastercard are postponing planned credit-card fee increases that were set to kick in this year after the plans drew criticism. The two payment processors cited the continuing effects of the coronavirus pandemic on businesses as the reasoning to hold off on increasing interchange fees for merchants until next April. Plans included increasing fees for online purchases by around 0.05 to 0.10 of a percentage point.
Original article (Feb. 25, 2021) – Visa and Mastercard, two of the most popular credit card processors, are planning to raise swipe fees for some types of credit-card purchases in April. Swipe fees, which are also referred to as interchange fees, are often a contested topic between merchants and card companies. The higher fees will apply only to “some” undefined purchases WSJ reports, including “small supermarkets” and “restaurants,” but the categories of spending affected are also expected to include “many online transactions.”
Merchants often end up paying fees of about 2% of their customers’ credit-card purchases. Online purchases, which have been more popular during the pandemic, are often even more expensive for merchants. The fees are set by Visa, Mastercard and other companies, and merchants pay them to the banks that issue the cards. That could separate institutions, or the same company in cases like American Express and Discover.
Cash purchases have been declining for years, and merchants say that Covid-19 has accelerated the shift. Even customers who are shopping in stores are shunning cash during the pandemic. That means that merchants are already paying more interchange fees, even before this planned fee increase.
On the other hand, card-industry executives explain that the interchange fees help cover the cost of innovation and preventing fraud. With online purchases, there’s potentially more possibility of fraud, and the higher swipe fees are justified.
