Visa and Mastercard agree to lower swipe fees
The companies will cap the fees they charge businesses when customers use their credit cards
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What happened
Visa and Mastercard agreed Tuesday to cap the swipe fees, or interchange fees, they charge businesses when customers use their credit cards, and let merchants steer customers to cheaper means of payment. The lower fees will save merchants an estimated $30 billion over five years.
Who said what
Tuesday's settlement eliminates "anticompetitive restraints" and provides "immediate and meaningful savings to all U.S. merchants," said plaintiffs' lawyer Robert Eisler. "A few years of very small relief followed by business as usual is not a good outcome from 20 years of litigation," said Christopher Jones at the National Grocers Association.
The commentary
The roughly 2% swipe fees "may sound like pennies," but they add up to $72 billion a year, Bloomberg said. Merchants can now charge customers extra for using higher-fee premium Visa and Mastercard cards, though doing so may create "a lot of friction at the point of sale, for not that much gain," said Lulu Wang, an assistant professor of finance at the Kellogg School of Management.
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The landmark antitrust settlement needs court approval to take effect.
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Peter has worked as a news and culture writer and editor at The Week since the site's launch in 2008. He covers politics, world affairs, religion and cultural currents. His journalism career began as a copy editor at a financial newswire and has included editorial positions at The New York Times Magazine, Facts on File, and Oregon State University.
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