I disagree with the author or analysts mentioned in this article that only merchants benefit out of this settlement.. In my view ultimately it is Customers who benefit more from this.. Due to monopoly or collusion of Visa/Master Card processing companies there was additional fixed cost for merchants. That cost has to come up in some way or other and is ultimately to be paid by customer. Now, there are two aspects of this settlement. Merchants can either charge extra for Credit Card based payments or they can even give discount to cash customers. Every time I pay at any retail store by credit card, I know that I am paying almost 2.5% to visa/master card or even 3.5% to Amex. Out of that, I am at the most getting 1 or 2% back at the end of year or usually even more in form of points/rewards. Nevertheless, if I have option, I would like to pay merchant in cash as long as they give me 2.5% or even 2% cash discount. First, I am paying it immediately based on my cash availability (or bank balance if using checks or debit cards) and second most importantly, I am getting immediate gratification of saving 2% which could be substantial savings. But then, that is personal choice..
In case of US, I think, Visa/Master Card folks have already made majority of population addicted to credit cards and people do spend more than their monthly incomes and don't mind carrying credit card loan/balances. It will be difficult for majority of population.. but in general, it will be good..
Off course there are some advantages of this Credit Card transaction based business. First, you don't have to carry cash which if lost is gone.. where as credit cards you can cancel them immediately. Then, you get some kind of purchase protection plans or extended warranties or sometimes, even ability to fight with merchants for bad merchandise. I have rarely used them.. but they are there.. But are all these benefits worth paying 2.5-3.5% extra on all of your purchases??
PAUL SAKUMA/ASSOCIATED PRESS
Under the settlement Friday, merchants can charge higher prices to consumers who opt to pay for their purchases with credit cards.
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In case of US, I think, Visa/Master Card folks have already made majority of population addicted to credit cards and people do spend more than their monthly incomes and don't mind carrying credit card loan/balances. It will be difficult for majority of population.. but in general, it will be good..
Off course there are some advantages of this Credit Card transaction based business. First, you don't have to carry cash which if lost is gone.. where as credit cards you can cancel them immediately. Then, you get some kind of purchase protection plans or extended warranties or sometimes, even ability to fight with merchants for bad merchandise. I have rarely used them.. but they are there.. But are all these benefits worth paying 2.5-3.5% extra on all of your purchases??
CREDIT CARD FEES
Using plastic may get costlier
Visa, MasterCard and banks will pay more than $6 billion in suit settlement with merchants
By Jessica Silver-Greenberg
New York Times
Retailers will be able to charge their customers more for paying with credit cards under the terms of a multibillion-dollar settlement announced late in the day Friday.
MasterCard, Visa and major banks, including JPMorgan Chase and Bank of America, agreed to pay more than $6 billion to settle accusations that they engaged in anti-competitive practices in payment processing.
The settlement is the culmination of a lawsuit brought in federal court on behalf of roughly 7 million merchants in 2005. Merchants said the companies engaged in price-fixing to charge high fees for processing credit and debit card payments.
In addition, the merchants claimed, the payment processors unfairly banned stores from compelling their customers to use less expensive methods of payments like cash and checks.
“Our decision to settle is based on our belief that MasterCard and our stakeholders are best served by an amicable resolution,” Noah Hanft, MasterCard’s general counsel, said in a statement.
Using plastic may get costlier
Visa, MasterCard and banks will pay more than $6 billion in suit settlement with merchants
By Jessica Silver-Greenberg
New York Times
Retailers will be able to charge their customers more for paying with credit cards under the terms of a multibillion-dollar settlement announced late in the day Friday.
MasterCard, Visa and major banks, including JPMorgan Chase and Bank of America, agreed to pay more than $6 billion to settle accusations that they engaged in anti-competitive practices in payment processing.
The settlement is the culmination of a lawsuit brought in federal court on behalf of roughly 7 million merchants in 2005. Merchants said the companies engaged in price-fixing to charge high fees for processing credit and debit card payments.
In addition, the merchants claimed, the payment processors unfairly banned stores from compelling their customers to use less expensive methods of payments like cash and checks.
“Our decision to settle is based on our belief that MasterCard and our stakeholders are best served by an amicable resolution,” Noah Hanft, MasterCard’s general counsel, said in a statement.
PAUL SAKUMA/ASSOCIATED PRESS
Under the settlement Friday, merchants can charge higher prices to consumers who opt to pay for their purchases with credit cards.
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Joseph Saunders, the chief executive of Visa, reiterated that the settlement was in the best interest of all the parties. Together, MasterCard and Visa have agreed to pay $5.2 billion.
As part of the settlement, MasterCard and Visa additionally agreed to reduce the charge to process transactions for eight months. That fee reprieve is estimated by the plaintiffs to be worth $1.2 billion.
“We think this is a historic victory,” said K. Craig Wildfang, a lawyer with Robins, Kaplan, Miller & Ciresi who represented the plaintiffs in the lawsuit.
The retailers battling the card giants include Kroger and Safeway.
Last year, retailers won another victory over what financial firms can charge them when customers use a different form of plastic, the debit card.
Under the Dodd-Frank financial reform law, banks had to reduce “swipe fees” that they collect from merchants each time a customer makes a purchase with a debit card.
Under the credit-card settlement Friday, worked out over months of negotiations, merchants can charge higher prices to consumers who decide to pay for their purchases with credit cards.
A customer, for example, who buys a $100 item with a credit card might be charged an additional $2.50. A judge still needs to approve the settlement.
Until now, the card companies banned merchants from adding such a surcharge, although gas stations and other retailers sometimes offered a discount for customers who paid in cash.
Lawyers for the merchants said the ability to charge for credit card use would not necessarily result in greater costs for consumers, but rather can be used as a way to push the credit card processors to reduce the amount they charge merchants.
Retailers have long sought to be able to charge customers more who pay with credit, reasoning that levying greater fees would help reduce their overall costs for accepting the plastic.
Merchants pay roughly $40 billion in fees each year to MasterCard and Visa issuing banks, Wildfang said.
The American Bankers Association said in a statement that while the banks “may not like all the results in this case, our industry is ready to put this matter behind us.”
Frank Keating, the association’s president, said: “Let’s be clear — retailers, not consumers, benefit from today’s resolution.”
“Let’s be clear — retailers, not consumers, benefit from today’s resolution.”
— Frank Keating, president, American Bankers Association
As part of the settlement, MasterCard and Visa additionally agreed to reduce the charge to process transactions for eight months. That fee reprieve is estimated by the plaintiffs to be worth $1.2 billion.
“We think this is a historic victory,” said K. Craig Wildfang, a lawyer with Robins, Kaplan, Miller & Ciresi who represented the plaintiffs in the lawsuit.
The retailers battling the card giants include Kroger and Safeway.
Last year, retailers won another victory over what financial firms can charge them when customers use a different form of plastic, the debit card.
Under the Dodd-Frank financial reform law, banks had to reduce “swipe fees” that they collect from merchants each time a customer makes a purchase with a debit card.
Under the credit-card settlement Friday, worked out over months of negotiations, merchants can charge higher prices to consumers who decide to pay for their purchases with credit cards.
A customer, for example, who buys a $100 item with a credit card might be charged an additional $2.50. A judge still needs to approve the settlement.
Until now, the card companies banned merchants from adding such a surcharge, although gas stations and other retailers sometimes offered a discount for customers who paid in cash.
Lawyers for the merchants said the ability to charge for credit card use would not necessarily result in greater costs for consumers, but rather can be used as a way to push the credit card processors to reduce the amount they charge merchants.
Retailers have long sought to be able to charge customers more who pay with credit, reasoning that levying greater fees would help reduce their overall costs for accepting the plastic.
Merchants pay roughly $40 billion in fees each year to MasterCard and Visa issuing banks, Wildfang said.
The American Bankers Association said in a statement that while the banks “may not like all the results in this case, our industry is ready to put this matter behind us.”
Frank Keating, the association’s president, said: “Let’s be clear — retailers, not consumers, benefit from today’s resolution.”
“Let’s be clear — retailers, not consumers, benefit from today’s resolution.”
— Frank Keating, president, American Bankers Association
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