Retailers, Consumers Could Be Winners in Credit Card Deal
Major credit card companies’ recent settlement with the U.S. Department of Justice was applauded by retail trade groups and consumer groups because the action might give merchants some breathing room from credit card swipe fees.
On Oct. 4, Visa Inc. and Mastercard Inc. reached a settlement with the DOJ to end rules and practices the DOJ considered to be anti-competitive and violations of the Sherman Act.
Visa, Mastercard and American Express were accused of maintaining rules that prohibited merchants from encouraging consumers to use lower-cost payment methods when making purchases.
The rules prohibited retailers from offering discounts to encourage consumers to pay with credit cards that cost the merchant less to accept. American Express did not join the settlement and is being sued by the DOJ for violating antitrust laws.
Merchants must pay a swipe fee whenever a credit card is used to purchase an item, and the market for these fees exceeded $48 billion dollars in 2008, according to the Food Marketing Institute. The 2008 fees were 300 percent of what they were in 2001, according to a statement by the U.S. Public Interest Research Group.
A statement from Visa said the company’s rules always have allowed American retailers to avoid large swipe fees by offering discounts to customers who choose to pay with cash, check or PIN debit. With the settlement, those choices will be expanded, according to the statement.
The DOJ will offer a 60-day comment period before the settlement is formally enforced. But merchants can start to offer consumers a discount now if the shopper uses a low-cost credit card or another form of payment. Credit card companies also will have to allow retailers to promote a particular credit card network or a low-cost card in their stores.
In the past, credit card company rules clamped down on such options, said Rachel Wolf, a spokesperson for the Washington D.C.–based advocacy group Merchants Payments Coalition. “From the merchant angle, it will change the way people do business. It will change the way customers use credit cards,” Wolf said.
Many consumers likely will be unaware of the new rules and will have to be informed by retailers, said Alison Muh, owner of the Surly Girl boutique on Los Angeles’ Robertson Boulevard. However, she said the new rules will benefit independent business people. “[Swipe] fees are not cheap,” she said. “If I could offer some discounts for cash, it will help.”—Andrew Asch
