MasterCard and Visa recently reached an estimated $30 billion antitrust settlement to limit credit and debit card processing fees for merchants, according to Reuters.You may well be wondering what that means to you as an independent retailer.

“Merchants have long accused Visa and Mastercard of charging inflated swipe fees, or interchange fees, when shoppers used credit or debit cards,” Reuters explains. This has become an increasingly large problem as credit and debit cards increase in popularity as the preferred means of payment. The pandemic accelerated the decline of the use of cash and checks, with some stores reporting 80% or more of purchases being paid for by actual or virtual cards.”

The fees that we pay on these transactions ranges from 1.5% to 3.5%, and swipe fees have more than doubled over the past decade. This comes on top of higher rents in many areas, making it increasingly difficult for small retailers to make a profit.  

The settlement will cap and lower the fees being charged, and allow small retailers to collectively bargain for better rates. The court win is based on protecting small businesses from MasterCard and Visa’s domination of the field, which was found to be preventing meaningful competition. (Similar antitrust suits against Amazon have so far not been successful.) 

In addition to possibly negotiating a lower rate, the settlement allows retailers to charge a surcharge on cards with higher swipe fees. In other words, you can recommend alternative, less expensive payment methods, and even charge consumers extra for using a premium card (usually one offering premium rewards) that costs you more in swipe fees.

An article on NPR.org noted “Industry groups for retailers both small and large said the settlement is a positive development, but far more needs to be done to remedy the current swipe-fee situation. They noted that the lowered fees would be only for a limited period of time — three to five years — after which the fees would return to their current levels.”

The settlement will not go into effect until later this year, or early next year. In case you’re worried about the impact on the credit card industry, the $30 billion dollar settlement is not a payout – it’s the amount that it is estimated to cost MasterCard and Visa in lost revenue.  Given the fact that the companies bring in some $160 billion in interest and annual card fees, they won’t feel the pain too much. But even a little relief is welcome for independent retailers trying to break even.

Happy Retailing,

Carol “Orange” Schroeder