Operations

MasterCard and Visa offer temporary reductions in swipe fees

The credit card giants have agreed to roll back the charges and freeze those rates for five years. But industry advocates aren't enthused about the offer.
Industry advocates would still like to address the charges through legislation. | Photo: Shutterstock

MasterCard and Visa have agreed to temporarily reduce and freeze the fees they charge restaurants and other merchants for processing customers’ credit card payments.

Under the deal, which still requires the approval of a federal court, the rollback would begin on April 1, 2025 and rates would not increase for five years. The announcement suggests the arrangement could be extended past that five-year window.

In addition to rolling back fees, the agreement enables restaurants to steer patrons paying with plastic toward less-costly methods of settling their bills, like using debit cards.

In addition, the financial giants say, merchants will be provided with easier methods for levying customer surcharges to defray what are commonly called swipe fees.

The deal was struck to cap 20 years of litigation between merchant groups and the credit card behemoths. Currently, merchants are participating in a class action that seeks injunctive relief, legal-ese for the return of a portion of the swipe fees they’ve paid since Dec. 20, 2020.

Lawyers for the credit card companies called the agreement the biggest in U.S. antitrust history, and asserted that it will save merchants a total of $29.79 billion over the five-year extent of the pact.

Restaurants have long complained that MasterCard and Visa can dictate the charges for processing credit payments because they have no competition from other institutions providing the same service. Legislation currently before Congress would foster that competition as a way of bringing down swipe fees or at least holding the charges at their current levels, which are the highest in the world.

According to the National Restaurant Association, swipe fees are now a typical restaurant’s third-highest cost, behind labor and food.

MasterCard and Visa say the legislation would leave consumers more vulnerable to identity theft because upstart competitors would lack the means to provide the extensive security measures the big two institutions have in place.

“Importantly, we are making these concessions while also maintaining the safety, security, innovation, protections, rewards and access to credit that are so important to millions of Americans and to our economy,” Kim Lawrence, president of Visa’s North American operations, said in a statement.

The agreement hasn’t persuaded the National Restaurant Association to stop pushing for legislation to bring down swipe fees.

“Today's announcement is a small reprieve, but wholly inadequate for restaurants suffering with record-breaking swipe fees,” Sean Kennedy, the association’s EVP of public affairs, said in a prepared statement. “This temporary discount won’t have a lasting or significant impact on costs. When you’re spreading out a settlement–even one this big–equally among millions of business owners over a few years, there will be a negligible impact on the costs restaurant operators pay to accept credit cards.”

He added, “The Credit Card Competition Act remains the best solution to fixing the broken credit card processing market.”

David Boyd, who runs the Credit Card Compare website for consumers shopping for a card, was also less than enthused by the agreement.

The deal "may have been designed to enhance competition and reduce consumer pricing, but it is unlikely to have a profoundly noticeable effect since the adjustments in fees are subtle (0.4%) and for the next three years," he said in a statement. "Although merchants see the agreement as a victory that paves the way for reduced prices, I am personally highly skeptical that prices will change in any meaningful way for consumers."

Update: Another assessment of the agreement has been added to the story. 

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