Credit Card Fee Hike Coming Soon: Everything You Need to Know
Network payment processors Mastercard and Visa announced recently that they plan to move forward with increasing fees related to the use of their card products in April 2022.
Although these fees apply to merchant processing of consumer cards during transactions, they will affect everyone.
Merchants already charge higher-than-normal prices for their products and services because of supply chain disruptions, workforce problems, the housing crisis and serious global economic events.
They're expected to raise their prices again to pass on these fees to their customers.
This guide outlines everything you need to know to help prevent this event from having a severe negative impact on your financial health:
Why Is This Happening Now?
Mastercard and Visa actually planned a merchant fee hike two years ago, but the pandemic caused by the novel SARS-CoV-2 virus and its variants disrupted their plan. Congress emphasized with them in 2020 that the fees would hinder economic recovery.
Yet, many financial experts estimate that network payment processing companies make more than thirty percent of their revenues from fees generated when they review and process transactions for merchants. These two companies alone are expected to make $1.2 billion off the increase.
As a result, it comes as no surprise to those in the know that Mastercard and Visa are doing this now. They're taking advantage of the belief by many people throughout the country that the pandemic and associated financial problems experienced by merchants and cardholders have mostly ended even though financial experts estimate that the majority of business owners and consumers can expect continued financial difficulties and harm well into 2023.
Some experts even believe that financial problems might continue for up to five or more years, depending on whatever happens next with COVID-19 and other crises.
The Reality of the Matter
Many business owners and consumers don't share the "return to normal" sentiment, especially given that Mastercard and Visa may charge as much as up to 0.5 percent more in interchange fees starting in April.
Consumers have been taught that using their cards is convenient and beneficial because of rewards programs. Merchants don't actually enjoy these perks. The new charges are expected to have a massive negative impact on merchant profits, which means that many merchants will have no other choice but to pass the fees on to customers who enjoy the convenience of using debit, credit, prepaid and other cards at checkout and the associated benefits.
In fact, merchants in states that allow customers to receive a fee for the convenience of using payment cards define this type of fee as a "convenience fee." Some merchants stop accepting the cards entirely.
The impact of these fees is expected to be so severe that the Merchants Payments Coalition is now attempting to stop Mastercard and Visa by asking for federal intervention from the U.S. Department of Justice and Federal Trade Commission. They believe that the fees are proof that network payment processors have broken antitrust laws in a variety of ways, including by promoting consumer overuse of payments cards and hitting merchants and consumers with high fees.
Mastercard and Visa claim that payment cards gave businesses and consumers a fast, convenient and safe way during the pandemic to continue to handle transactions.
Many businesses wouldn't have survived with cash-only transactions because a lot of people simply weren't visiting brick-and-mortar locations. Consumers also benefited because they were able to pay for products and services remotely without risking potential exposures to the virus.
They foresee this trend continuing with no end in sight and claim that interchange and similar fees to merchants help cover the costs associated with managing their payment processing networks.
Tips for Offsetting These Fees
Mastercard and Visa aren't entirely wrong about the future of debit, credit and prepaid card payments. For now, without government intervention, many people will continue to primarily use payment cards for transactions.
If merchants want to remain competitive, then they need to continue to accept these cards, which means that they must also accept the fees associated with handling them at the point of sale. Since every consumer can expect to see the fees passed through to them as either a convenience fee or higher prices on products and services, it's important to use every available tool to offset these fees.
You can start by transferring balances to cards that offer lower interest rates and better rewards. With the latter, always attempt to find a card that offers you either cashback or a non-expired points system that earns you enough to trade for something you really want or need.
Additionally, seek ways to save money by lowering the costs of products and services. For example, if you can't pay cash, consider using coupons and price matching to save money during transactions. Also, look into rebate programs on large appliances and electronics.
Things to Keep in Mind
As a consumer, you can't personally stop network payment processors or merchants from overcharging you.
That said, you can reduce the impact that their decisions have on your wallet or purse and overall financial health and well-being.
You merely need to stay up to date about financial news related to card processing and use various methods at and after the point of sale to reduce costs or help you earn back a bit of money or other financially beneficial rewards.
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