Mastercard and Visa set to increase credit card fees in coming months

Mastercard and Visa, two of the global payments giants, are planning on increasing their credit card fees. This refers to the charges that many merchants pay upon accepting their users’ credit cards. The increase is likely to begin in October and April and will largely be on online purchases.

Increase in credit card fees

Consulting company, CMSPI has noted that the surge in credit card fees may equate to a further $502 million in annual fees for merchants. Over half of this amount will be in increases in network fees while the rest will equate to a surge in interchange /swipe fees. The network fees are taken by the payments company while the interchange fees go to the bank issuing the card.

Although most shoppers know little about the applicable interchange fees, it is often a big deal for merchants of all sizes. In 2022, merchants in the US paid about $93 billion in credit card fees to Mastercard and Visa. In comparison, the amount stood at $33 billion in 2012.

The credit card fees come at a time when many businesses are still recovering from the COVID-19 pandemic. Besides, high-interest rates and inflation have been hurting most entrepreneurs in recent months.

On the one hand, the payments companies and banks issuing the cards believe the increase in fees will help them cater for the costs of innovation and fraud prevention. Even so, merchants may have to spill over the additional fees to their customers in the form of higher product prices.

This in turn may lower demand for some goods and services, further hurting the businesses. This explains why some merchants are enticing their customers to pay via cash, cheque, or debit card by offering discounts to do so.