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WASHINGTON – Almost immediately after agreeing to reduce “swipe” fees charged to merchants to process credit card transactions, Mastercard plans to increase fees for both credit and debit card transactions by more than $250 million this month, the Merchants Payments Coalition said Wednesday.
“This new increase proves the credit card companies are continuing to take advantage of Main Street,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “They made a show of ‘settling’ legal claims, but nothing in the settlement limits the fees that go directly to Visa and Mastercard. That leaves them free to continue to increase these fees and they are doing it already. The only answer is for Congress to pass the Credit Card Competition Act and bring fair market competition to the badly broken payments market.”
Mastercard plans to increase its Acquirer Brand Volume Fee – which applies to all credit, debit and prepaid card transactions and is also known as an assessment fee – from 0.13% to 0.14% beginning April 15, according to documents seen by MPC. Based on Mastercard’s $2.591 trillion in transactions on those cards during fiscal 2023, that would amount to an annual increase of $259.1 million. Visa and Mastercard are increasing other fees as well, but sufficient information is not available to calculate the dollar amount of those increases.
The increase is part of an unending pattern. Visa and Mastercard combined have raised or created new fees that go directly to them at least 40 times since 2011 alone. The Mastercard assessment fee increase would be the third round of hikes in various combinations of interchange fees and network fee rates in as many years. Visa and Mastercard raised fees by $1.2 billion in April 2022 despite pleas from bipartisan members of Congress not to do so because it would contribute to inflation. Last October, they raised fees by $502 million, according to payments consulting firm CMSPI. That, too, came despite requests from Congress to withdraw the increases. This month’s action would bring total swipe fee rate increases to nearly $2 billion over the past three years.
Under a proposed settlement in long-running class action litigation announced last week, Visa and Mastercard agreed to lower credit card swipe fees – which currently average 2.26% of the transaction amount – by at least four basis points for at least three years. For five years, swipe fees would not increase above rates that existed at the end of 2023, and the average rate would be at least seven basis points below the current average.
The settlement, however, applies only to interchange fees, which are the component of swipe fees that goes to the bank that issues a card. The assessment fee that Mastercard plans to increase is a network fee that goes to Mastercard.
The new increase comes as Senate Judiciary Committee Chairman Richard Durbin, D-Ill., one of the lead sponsors of the Credit Card Competition Act, plans to hold a hearing on lack of competition over swipe fees. Durbin invited the CEOs of Visa and Mastercard to testify but both have refused, which he said “speaks volumes.”
Total credit and debit card swipe fees – which have risen 50% since the pandemic and reached a record $172.05 billion in 2022 – are most merchants’ highest operating cost after labor. The fees are far too high to absorb, especially for small merchants, and drive up consumer prices by over $1,000 a year for the average family.
Visa and Mastercard – which control 80% of the market – each centrally set the swipe fees charged by banks that issue cards under their brands, and also block transactions from being processed over other networks that could do the job with lower fees and better security. The legislation would require banks with at least $100 billion in assets to enable cards they issue to be processed over at least two unaffiliated networks – Visa or Mastercard plus a competitor like NYCE, Star, Shazam or Discover. The current ban on running transactions over a competing network means none of the networks could be added without passage of the CCCA, including Discover despite the recent announcement of its merger with Capitol One.
Banks would choose which networks to enable but merchants would then decide which to use, resulting in competition over fees, security and service that is expected to save merchants and consumers over $15 billion a year. Rewards would not be affected, security would be improved, consumers would still use the same cards, and community banks and all but one credit union would be exempt.
