Credit Card Late Fees Could be Lowered by Biden ‘Strike Force’
What did the settlement say?
Visa and Mastercard have agreed to a settlement with U.S. merchants that promises to lower the fees stores have to pay to process credit card payments. As part of the settlement, the companies will lower interchange rates, also referred to as “swipe rates,” by at least 4 basis points for three years. Swipe rates must be at least 7 basis points below the current average for the next five years. Furthermore, merchants will have the option to impose surcharges on premium credit cards with higher swipe fees.
What does this mean for credit card holders?
Although the settlement does not directly impact credit card holders, it could lead to more expensive premium cards. Premium cards, such as the Chase Sapphire Reserve and the Platinum Card from American Express, are already costly for both consumers and merchants. If the settlement is approved, merchants would have the ability to charge customers more for using premium Visa and Mastercard credit cards. However, some experts believe that stores may be reluctant to charge these customers extra, as it could strain customer relations and potentially harm their businesses.
Will merchants pass down their savings to consumers?
In theory, merchants could pass down some of the savings resulting from the settlement to customers by lowering prices. This could be particularly beneficial for smaller businesses looking to offer more competitive prices. However, other experts are skeptical about whether merchants would actually pass on these savings to consumers since it may not be in their best interest.
What will Visa and Mastercard do?
Authors of financial books, such as Beverly Harzog, expect only limited changes among credit card issuers after the settlement. Harzog suggests that the temporary nature of the changes and the time required for credit card issuers to make significant adjustments may limit the overall impact. While the settlement is awaiting court approval, Visa has stated its intention to maintain rewards and credit access for its customers, according to Kim Lawrence, President of North America.
