Visa and Mastercard Settle Dispute Over Merchant Credit-Card Fees, Impacting Small Businesses
Visa and Mastercard have settled their long-running dispute over merchant credit-card fees, with expectations that some future fees could be lower for cards with fewer rewards. However, this settlement introduces complexity for merchants and customers alike.
Merchants may respond by layering fees according to card type or even by ceasing to accept certain cards if costs remain high. Such measures could create friction for customers, who might face lists of acceptable cards, new charges when using certain cards, or price adjustments to account for card fees.
Merchants themselves would bear higher costs to manage differentiated card-type pricing and pay fees to point-of-sale systems to implement these distinctions. Credit-card fees currently fund rewards programs and merchant partnerships, including deals with Google Workspace, ZipRecruiter, and Lyft, meaning the settlement could either reduce or increase costs for these benefits, impacting small businesses.
Data from the National Bureau of Economic Research shows that small-business card usage surged from approximately $10,000 per month in 2020 to $24,000 per month by April 2022, with around 55% of small businesses having used a corporate card in the past 12 months.
Despite the settlement, the author argues it is not a victory for small businesses and may actually increase their costs and reduce sales. Instead, a simpler approach might be to implement a blanket price increase across all products to offset card fees.
