Visa, Mastercard Mull Increasing Fees for Processing Transactions
Visa and Mastercard, the two biggest U.S. credit card networks, are preparing to raise certain fees levied on U.S. merchants for processing transactions starting this April, The Wall Street Journal reported on Friday, citing people familiar with the matter. Some of the changes relate to so-called interchange fees, the report said. Interchange fees are what merchants pay to banks when consumers use a credit or debit card to make a purchase. Fees that Mastercard and Visa charge financial institutions, such as banks, for processing card payments on behalf of merchants, are also set to go up, the report said. A Visa spokesperson confirmed that the fee hikes would go into effect in April, but only for merchant banks, and not merchants.
Total Retail's Take: Another cost for merchants that's on the rise, joining shipping rates, product tariffs, customer acquisition, and others. This is the new reality for retailers, as product margins get thinner as costs continue to increase. The value of offering consumers multiple payment options, including various credit cards, is partially offset by the increased processing fees retailers are being charged for orders purchased with a credit card. Retailers are in a tough spot because they almost have to offer Visa and Mastercard as payment options, but are forced to pay the fees those credit card companies charge. Don't offer Visa and Mastercard as payment options, and they will almost assuredly see their revenues decrease; offer the cards as payment options, and take the hit to bottom-line profit. Given the choice, most retailers are going to opt for the latter.