Stores, credit-card companies in battle over fees

Retailers and credit-card companies are battling over
fees.
AP/Luis
Hidalgo

• Retailers are hoping to quash the “honor all cards”
  rule that requires retailers to accept all of a network’s
  credit cards if they accept any as a form of payment, the Wall
  Street Journal reported.
• The rule is included in contracts between Visa and
  Mastercard and
  the retailers that accept their cards.
• Some major retailers are arguing that the fees charged
  by certain premium rewards cards are getting too high to be
  sustainable.
• The conflict is one sticking point in a 13-year-old
  lawsuit between banks and retailers.

Stores and credit-card companies are at war over fees.

Major retailers including Walmart,
Kroger, Amazon, and
Target will
likely either opt out or have already opted out of the $6.2
billion settlement of a class-action lawsuit filed by retailers
against credit-card companies Visa and Mastercard and associated
banks back in 2005. 

According to the Wall Street Journal, the issue at hand
is what are called swipe fees, or interchange fees. These are the
fees that are charged by credit-card providers per customer
transaction. Some premium rewards cards include very high fees on
merchants, a cost that retailers are forced to absorb. Retailers
are not able to negotiate fees with credit-card companies. 

Since the “honor all cards” rule in retailers’ contracts with
Visa and Mastercard stipulates they must accept all credit cards
in either network, retailers cannot keep customers from using
these premium cards, which can charge swipe fees of up to more
than 2% on a whole transaction. 

These retailers are now sounding the alarm on swipe fees
because they are creeping up at a staggering rate. Merchants
paid $43.4 billion to Visa and Mastercard in fees in 2017,
according to Nilson Report data reported by the Journal. That’s
up 68% from six years ago.

If retailers get their way, they would be able to pick
which cards to accept, likely barring some of the more premium,
high-fee cards from being used. 

A spokesperson for Home Depot confirmed to Business Insider
it is dropping out of the $6.2 billion settlement to pursue other
legal avenues not part of the class action. 

“The problem with the high interchange fees is that the end
result is higher prices for consumers,” a spokesman for Home
Depot told Business Insider. “That’s an important point.”

Both Visa and Mastercard released statements in support of
keeping the “honor all cards” rule.

“Visa believes consumers should always have a choice in how
they pay, including being allowed to use their Visa credit card
regardless of the card type or issuer. When consumer choice is
limited, nobody wins,” a Visa spokeswoman told the
Journal.

Visa’s position is that if stores were able to pick and choose
which cards to accept, it would become too confusing or limiting
for customers.

Previous settlements were reached in the 13-year-old lawsuit, but
they fell through after large retailers dropped out for fear they
would be barred from pursuing subsequent legal action against
Visa, Mastercard, and the associated banks. The new settlement
allows large retailers to drop out without voiding the
settlement.

Credit-card fees are a hot-button issue for retailers. Earlier
this year, Kroger stopped
accepting all Visa credit cards at its Foods Co. stores due
to Visa’s fees, which the grocer called “out of alignment.”
Kroger said the move was made to keep prices low for
customers.