The top two payment networks in the US, Visa Inc. (V) and Mastercard Inc. (MA), recently changed their fees structures for those merchants, who accept credit cards as a payment option from customers. The fees, charged every time the customer uses the card, is in most cases a percentage of the total amount spent by the customer. Across the board, for all businesses, the processing fees, or “swipe” fees, on credit cards, is most likely to increase.
Majority of the interchange fee goes to banks, which are issuing the cards. A very smaller percent comes the way of Visa and Mastercard, mainly for using their network to process the transaction. Visa and Mastercard said that the fees help cover the costs of innovation and keeping fraud away.
According to the companies, the fees were planned years ago but was delaying due to the pandemic. The changes include both increases and decreases and are designed to help small businesses and offer a safe and convenient shopping experience for consumers. However, retail trade groups and a group of lawmakers are of the opinion that the step will add more burden onto the customers.
Although some companies forecast fees hikes, Mastercard said that it is lowering costs for all merchants with transactions below $5 and Visa said that it is cutting rates by 10 percent for more than 90 percent of small businesses, which according to Reuters meant those with $250,000 or less in credit card volume. Both the card companies said that these changes will help make small businesses more competitive against big-box retailers and help local shoppers.
According to analysts, only a slow segment of merchants with a small overall transaction volume might benefit from the new fee structure. Most of the retailers will experience increased costs, which will ultimately affect the customer, who is already dealing with the highest inflation in 40 years.
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