Small Business News

Retailers Continue to Fight Against Credit Card Swipe Fees

Last week, news broke that Visa and Mastercard had reached a $6.2 billion settlement regarding interchange fees — more commonly known as “swipe fees.” The long-in-the-works suit found merchants accusing the credit card companies of violating anti-trust laws by preventing them from suggesting customers use other forms of payment. Despite the ruling, some retailers are continuing the fight against these swipe fees, taking aim at rewards credit cards in particular.

As the Wall Street Journal reports, some rewards credit cards bear higher swipe fees than other cards. Complicating matters, Visa and Mastercard have “honor all cards” stipulations in their policies, disallowing merchants from excluding the higher-fee cards. A Mastercard spokesperson explained the policy further, saying, “If a merchant agrees to accept Mastercard, there cannot be any discrimination between different issuers’ cards or between different types of cards issued by one financial institution.”

Currently major retailers like Target, Home Depot, and Amazon are challenging the “honor all cards” and, according to WSJ, are likely to opt-out of the aforementioned settlement in order to pursue further legal action. Similarly the recent settlement was slammed by the National Retail Federation, who stated, “The monetary settlement doesn’t solve the problem. Swipe fees cost retailers and their customers tens of billions of dollars a year and have been skyrocketing for nearly two decades. Ending the practices that lead to these anti-competitive fees is the only way to give merchants and consumers full relief once and for all.”

Given the dominance of Visa and Mastercard, the proposition of banning the two credit card issuers entirely is a proposition most merchants would likely not be willing to consider. However there are still some who are threating to swallow that poison pill. As we previously reported, Kroger-owned grocer Foods Co. dropped Visa as a payment option last month with the chain’s parent company saying that it may follow suit. With the policy is still relatively fresh, it’s unclear how the move is impacting the grocer or its customers.

While it’s been larger retailers at the forefront of this battle, there’s no doubt that the fight over swipe fees impacts small businesses as well. If big businesses are complaining that high swipe fees are eating into their profits, one can only imagine how the same fees are affecting smaller retailers that may be operating on slimmer margins. In this case, perhaps the big guys taking the lead and using their clout to bring about change will prove to be a boon to the little guys as well. Of course don’t expect this change to come overnight — after all, the recently-settled case had been in the works for more than a decade.

Other Articles by Jonathan Dyer