Credit card “swipe fees” have been plaguing merchants for quite some time, each card carrying a range of fees from 1.5 to 3.5 percent. For merchants, these fees drastically cut into profitability, ultimately leading to increasing their prices to customers; it becomes a vicious cycle. As a result, a legal battle has ensued in efforts to end these problems.
Taking It To Court
In 2005, an antitrust lawsuit was filed against MasterCard and Visa for allegedly conspiring with some of the largest banks in the country to set “swipe fees”. Stating the fees were necessary to pay for processing transactions and cover losses from fraud, these fees force merchants to pay a percentage of the transaction to the credit card companies each time a transaction is made. However, merchants feel these fees are simply a way for the credit card to boost their profits.
In response, 19 big trade group merchants filed a suit against the two companies to end these fees and increase regulations of future matters. Back in July, a $7.25 billion settlement was proposed that would repay the merchants for past fees, reduce the fees for the next year and allow for merchants to require customers to pay the fee for future transactions. Final approval of the settlement has been delayed, as there has yet to be a majority share of acceptance among the 19 plaintiffs.