Why Shoppers Could Soon See Higher Fees for Credit-Card Purchases
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Here's your money briefing for Thursday, March 10th. I'm J.R. Whelan for The Wall Street Journal. It's getting more expensive to shop every time you pull out your credit card. And now we report that the credit card companies plan to raise the fees they charge merchants every time a customer pays with plastic.
So this would be kind of the first widespread round of increases in for the fees that merchants pay since the pandemic began.
Coming up, our credit card reporter, Anna Maria Andriotis, tells us why the card companies are boosting their fees now and what it could mean for your next purchase. That's after the break.
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Visa and MasterCard are about to raise the fees they charge many merchants when shoppers make credit card purchases.
What announcement did Visa and MasterCard make about merchant fees?
So what does that mean for you the next time you pull out your credit card or wave your phone at the checkout scanner? WSJ credit card reporter Anna Maria Andriotis has been looking into this, and she joins me now. Hey, Anna Maria, thanks for being with us.
Great to be speaking with you.
So, Anna Maria, you broke the story for us. Can you start out by explaining why Visa and MasterCard are raising these fees?
So Visa and MasterCard are the two largest US card networks. And as networks, one of the things that they do is they set the fees. These fees are called interchange fees. which merchants pay to the banks that issue consumers credit cards every time that consumers go shopping with their credit cards. Generally, the networks will change their fee structure around this time of the year with plans for those changes to kick in, or at least some of those changes to kick in. in April of each year. During the last two years, the companies put many or all of their scheduled fee increases on hold because of the pandemic and the toll that it was taking on merchants. As of now, Visa and MasterCard are planning on moving forward with increases.
So this would be kind of the first widespread round of increases fees that merchants pay since the pandemic began.
Now, what do Visa and MasterCard use this money for? What do they use these fees for?
So Visa and MasterCard are not the companies that actually pocket these fees. Interchange fees are pocketed by banks that issue the credit cards that all of us as consumers use. Essentially, what these banks do with these fees, well, at least one of the things that they do with these fees is it helps to fund the rewards programs that are on consumers' credit cards. Think of the cashback rewards or the travel-related rewards, points that people redeem for free airfare, for hotel rooms, or the cashback that we get and we use towards paying off our statement balance.
So when somebody uses a rewards card and they get a free week of hotel rooms, that money's got to come from somewhere to pay for it.
Exactly, exactly. Now, there are different reasons why card companies say that these fees are needed. In general, what the networks say is, look, card fees ultimately go to help for things like covering costs that are related to fraud, to innovation.
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