This week, The Wall Street Journal Editorial Board published an opinion piece addressing recent developments in the ongoing debate over credit card swipe fees. The editorial focuses on a new settlement reached between Visa and Mastercard and merchants, which comes after a two-decade legal dispute regarding interchange fees.
According to the editorial, "Kansas Sen. Roger Marshall and Illinois’s Dick Durbin have spent years pushing misconceived legislation to reduce credit-card swipe fees. So they may be disappointed that credit-card companies have agreed to do so without their political interference."
The settlement announced by Visa and Mastercard will lower the average fee charged to merchants by 10 basis points for five years, cap rates for standard cards at 1.25%, and give merchants more flexibility in choosing which cards to accept.
The editorial explains that card issuers typically charge merchants about 2% of each transaction for processing electronic payments and fraud prevention. These fees are often shared with customers through rewards programs designed to attract more users.
Merchants have expressed concerns about both the fee rates and rules requiring them to accept all cards from a network if they accept one, making it difficult to refuse higher-fee cards. However, customers tend to spend more when using credit cards—especially those offering significant rewards—than when paying with cash or debit.
Despite these benefits, Senators Durbin and Marshall have continued efforts toward legislation that would require banks to allow transactions on at least two networks, aiming for increased competition and lower fees but potentially reducing reward offerings.
The editorial suggests that Monday’s settlement could address many merchant concerns without legislative action: "Monday’s settlement may moot their legislation by resolving merchants’ core complaints." It also notes the growing competition from payment apps like PayPal and Venmo, as some small businesses encourage app payments or offer discounts for non-card transactions—a trend that may have influenced the agreement.
Concluding its position, the editorial states: "What do you know? Businesses can work out their disagreements without government intervention."
It further adds: "We believe investing in new technologies and legislating national data security standards will create a stronger payment system."
The increasing use of alternative payment platforms such as PayPal and Venmo is reshaping how small businesses handle transactions; some now steer customers toward these options or provide incentives not to use traditional credit cards (https://www.wsj.com/finance/banking/visa-mastercard-credit-card-settlement-merchant-fees-8a9dff6b).