Beginning this April, the two biggest U.S. card networks Visa Inc and Mastercard Inc are intending to increase some of their transaction processing fees imposed on merchants in the United States, as reported Wall Street Journal on Friday, citing people familiar with the matter.
In order to make purchases at stores, when consumers use a credit or debit card, the merchant have to pay an interchange fee to the bank, and current move of the card companies also include some of the changes that are specifically related to that interchange fees.
Card payment processing fees charged to financial institutions like banks by the Visa and Mastercard on behalf of merchants are also likely to be increased, the report said.
Though a Visa spokesperson confirmed Reuters that the fees are going to rise with effect from April, 2019, but also clarified that fee hikes will be applied only to the merchant banks and not on merchants.
Those financial institutions which maintain the accounts for sellers like Costco and Amazon are categorized as merchant banks and Citigroup, Bank of America and JPMorgan are some of the largest merchant banks in the United States.
To absorb the fee rise by themselves or pass it on to the sellers is upon the discretion of merchant banks, and if passed on to sellers, then its further up to sellers if they want to pass on the rise to consumers or not.
To cover the card fees, a proportion of up to 2.5 percent has already been included in the prices of goods and services by sellers which goes to card companies, the WSJ said.
In past, the companies have said that merchants’ sales usually grew with the use of their credit and debit cards and especially in countries like the United States where most of the customers prefer payments through cards, and in order to make payment processing safer, card companies have to spend a lot to enhance their capabilities to counter frauds and thefts and continuously improve their security measures, and that expenses are need to be covered.