Big US Retailers Take on Visa and MasterCard in Battle over Swipe Fees

Major retailers in the US are rallying against credit giants Visa and MasterCard in an effort to fight what they believe to be unfairly inflated credit processing swipe fees. National retail chains such as Target, Macy’s and JC Penny are involved in the lawsuit, along with many other merchants. The increased swipe fees, according to the retailers involved in the legal battle, place an unfair financial burden on retailers everywhere.

The nature of shopping in the modern world has changed significantly over the past several years. Credit and debit cards have become increasingly common all over the world, to the point where many shoppers no longer carry cash when they leave home. Card swiping makes shopping much more convenient for the average consumer, but that convenience comes at the expense of the retailer. Every credit or debit transaction comes with an associated fee, which the retailer pays to a credit processing company.

Inflated swipe fees imposed by Visa and MasterCard increase the financial strain put on retailers with every swipe of the card. While the merchants can’t risk losing huge amounts of business by declining to accept Visa and MasterCard transactions, they can take a stand against the credit institutions themselves–and they have.

In a legal battle that has continued for months, major retailers are refusing to budge. Visa and MasterCard’s recently proposed settlement of over $7 billion has been turned down by several of the big retail chains involved in the struggle. Had the retailers accepted the settlement, the credit giants could have continued with their newly increased transaction fees worry-free. Businesses, however, were not prepared to back out so easily.

Declaring that the settlement provided insufficient compensation, retail chains that include some of the biggest businesses in the United States opted out of the proposed agreement. The plaintiffs also noted that the settlement required them to make broad legal agreements that could block them from pursuing legal actions against Visa and MasterCard in the future. Perhaps worst of all for the retailers, accepting the settlement would mean accepting the increased swipe fees–as well as any possible fee increases that might arise in the future.

All in all, the credit companies’ proposed settlement amounted to a deal that would benefit them while continuing to strain the retailers.

Visa and MasterCard’s preeminence in the market has afforded them more options than the average credit company. As the banks issuing these cards have no need to compete for acceptance in the market, they can essentially feel free to set their own rates and increase profits. However, in a time when credit is so common, transparency has increased. Resources like RateSupermarket give everyone access to the numbers that show what financial institutions are doing on a daily basis. Fee inflation like this is now more difficult to pass on any level.

What will come of this legal battle remains to be seen. Several major retail chains are clearly not ready to accept anything less than a fair agreement with the credit giants. Will Visa and MasterCard give in, or continue their own fight to increase swipe fees and drive up profits?