Swipe fees may be set to spike again, costing consumers

Consumer prices could go up if business owners have to juggle how they deal with credit card fees that Visa and Mastercard are planning to raise. According to a report by The Wall Street Journal, the fee increases are scheduled to begin in October and would mark the second fee hike this year.

Such a move would certainly line Visa and Mastercard’s pockets. The changes could result in retailers paying an additional $500 million or more annually in fees, wrote CMSPI, a retail payment advisor. A little more than half of that haul will come from increases in network fees. The other half will be put in the collection plate of swipe fees. 

The Journal reported that retailers pass some of those costs on to consumers in the form of higher prices. Debit card, cash, and check-paying customers have increasingly been offered discounts by small businesses.

Is this actually a ‘go?’ 

ConsumerAffairs asked both Mastercard and Visa for comment. Visa didn’t respond by the time this story was published, but Seth Eisen, senior vice president, Communications at Mastercard said, “We’d simply note that Mastercard did not raise interchange rates. The recent reporting in the Wall Street Journal is inaccurate.”

“And, with respect to the service referenced in the [CMSPI] report, it’s a value we provide to the acquirer – the merchant’s bank. It helps them avoid the potential of a subscription-based transaction being declined.”

Will there be a consumer backlash?

If what the Journal and others report becomes a reality, it is not a pretty situation for consumers who’ve had to deal with inflation — not to mention all the other budget squeezers Americans have faced over the last few years. One financial expert told ConsumerAffairs that the move might turn out to be ugly for the retailers, too. 

“Swipe fee increases aren’t just putting the squeeze on businesses financially; they are also creating pressure when it comes to those merchants from a customer-relations standpoint,” said Tom Zauli, senior vice president and general manager of Softrax, a provider of advanced revenue management solutions.

“Consumers generally aren’t tuned in when it comes to regulatory changes. So when they see prices increase or new fees suddenly appear, their instinct is to express concern or dissatisfaction with the business.”

Consumers have options

Will businesses and consumers meet in the middle on this issue? Zauli suggests it’s possible, mainly because customers who favor certain businesses are looking to these companies to provide additional options for how they pay for a product or service. 

He says that one example is consumption billing in which a customer pays for only what they use. Another example would be for a customer to opt-in for a free service, such as an app, and buy features or experiences during use – much like a subscription. 

“So adding a layer where the consumer becomes more of a partner in understanding the swipe fees will help solidify loyalty even further,” Zauli said.

“Consumers can explore alternative payment methods that might have lower associated fees, such as mobile wallets, digital payment platforms, or even using cash for smaller transactions,” Jon Morgan, CEO of VentureSmarter, told ConsumerAffairs.

“By diversifying their payment options, consumers can potentially reduce the impact of rising swipe fees on their budgets.”