Consumers who are used to making everyday purchases with their credit cards may soon find that it is more expensive to do so.
A pending settlement between merchant groups and Visa and MasterCard, the world’s two largest payment processors, could allow retailers and service providers to start charging consumers higher prices for any transactions completed using a credit card, according to a report from the Wall Street Journal. Currently, Visa and MasterCard ban this practice in the U.S. as a condition of merchants being able to accept card payments, though it’s expected that the settlement would at least change those rules, if not ban them altogether.
[Free Resource: Check your credit score and report card for free before applying for a credit card]
This latest talk of the change comes as a result of more than 50 lawsuits brought by various merchants and groups against the payment processors since 2005, which were more recently consolidated in U.S. District Court in Brooklyn, New York, the report said. Merchants may be eager to add credit card surcharges because of the high costs that can often come with processing these types of purchases. Visa and MasterCard usually charge a small portion of a total purchase price just for handling such a purchase – usually about 3 percent – and merchants say this costs even small businesses tens of thousands of dollars per year.
“Merchants prefer complete flexibility, and in their eyes relaxing some of these rules like surcharging [is] something that will be permanent,” Glenn Fodor, an analyst with Morgan Stanley, told the newspaper.
Already, Visa and MasterCard have relaxed their rules regarding interchange fees somewhat, and now allow merchants the ability to give customers discounts for using cash, which retailers say would help those who made purchases without a card to save more money as well, the report said. However, they did so in preference to allowing merchants to actually charge more for credit card use. Recent federal regulation limited the amount processors could charge for handling a debit transaction, but did not address those for credit card purchases.
[Credit Cards: Research and compare credit cards at Credit.com]
These surcharges may be difficult for consumers to bear because of the added cost involved. Depending on their size and borrowers’ spending habits, they could add a sizable amount of debt to a balance every month, making it more difficult to pay back in the future.
Image: Irish Typepad, via Flickr
Credit.com Credit.com offers straightforward tips and advice to help you make smarter financial decisions. Visit Credit.com to sign up for your FREE Credit Report Card and find out where you stand today! Have a question for our experts? Connect with us on Google+.
Follow Us
