The Visa-MasterCard settlement: Will credit card users now have to pay 'swipe fees'?

A massive $7.25 billion deal ends a long-running battle with merchants, but also opens the door for retailers to charge customers extra for using plastic

Credit cards
(Image credit: Thinkstock/iStockphoto)

Visa, MasterCard, and several banks have agreed to pay $7.25 billion to settle antitrust charges that were brought by 7 million merchants, a diverse group ranging from the nation's largest chains to mom-and-pop shops. If the deal is approved by a federal judge, it would end a long-running dispute over the "swipe fee" — 2 to 5 percent of the bill — that Visa and MasterCard charge merchants every time a customer uses plastic. Under the terms of the settlement, Visa, MasterCard, and the banks would pay out $6 billion in penalties and reduce the swipe fee. In addition, merchants would be allowed to levy a surcharge on customers who use credit cards, which would let them recoup the cost of the reduced swipe fee. Are retailers likely to do so?

Yep. Customers should expect to start paying more: Many retailers will likely impose a new "checkout fee" for consumers paying with credit cards, says Susanna Kim at ABC News. While big chains like Walmart and Target may decide that they can afford to eat the costs of the swipe fee in order to retain customer loyalty, struggling mom-and-pop shops around the country are more likely to take advantage of this windfall.

"Settlement may lead some consumers to pay 'swipe' fees"

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE
https://cdn.mos.cms.futurecdn.net/flexiimages/jacafc5zvs1692883516.jpg

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

In some cases, customers won't even have a choice: The checkout fee is a "tricky question for many retailers because they risk angering customers who prefer credit cards for purchases," says Robin Sidel at The Wall Street Journal. But "hotels and airlines are among the industries that may be the most likely to impose surcharges because their customers don't typically pay any other way." In those cases, the surcharge will probably be incorporated seamlessly into all their products and offerings.

"Card pact's foes arm for battle"

No. Retailers would be dumb to charge more for plastic: Merchants have benefited enormously from the spread of credit cards, and most of them would be insane to put that revenue stream at risk, says Daniel Fisher at Forbes. Many sales would simply not occur if customers had only a credit card in their wallet and were expected to pay more than those who happened to have cash. Furthermore, introducing a checkout fee would make the shopping experience too similar to buying an airplane ticket, evoking the multiple surcharges and hidden fees that have made the industry synonymous with awful customer service.

"$6 billion visa settlement frees consumers to pay more"

To continue reading this article...
Continue reading this article and get limited website access each month.
Get unlimited website access, exclusive newsletters plus much more.
Cancel or pause at any time.
Already a subscriber to The Week?
Not sure which email you used for your subscription? Contact us