According to Reuters
, Visa Inc., Mastercard and the banks issuing their credit cards recently agreed to pay a settlement in the ballpark of $6 billion to $7.25 billion.
Additionally, merchants will now be allowed to encourage consumers to use other forms of payment that aren't as costly to them as credit cards.
The class action lawsuit was initiated in 2005 by millions of merchants
A judge still has to approve this settlement, however if it is approved, the big question that remains is how this will affect consumers?
Ever see a sign, usually in a small business, that you have to spend over $10 or $15 to use a credit card? The reason why that minimum is imposed is because it costs the business more every time a consumer uses plastic. The fee is a so-called "swipe fee" imposed by card issuers that the business has to pay. It can be cost-prohibitive for the business if a consumer buys a small item and uses a credit or debit card to pay.
Last year, the Durbin Amendment
was enacted and banks were limited
on what they could charge for debit card purchases.
However, this settlement now opens up for businesses to charge consumers more if they use credit cards instead of cash. NBC News 12
in Richmond, Va., elaborates more on this issue.
Whether businesses do this or not remains to be seen. While it may bring in more monies, it could also alienate some consumers.
"Some people might get mad and not come back…You don't want to do that," Tobacco Club and Gift store owner Adam Othman told NBC.
reported K. Craig Wildfang, a partner at Robins, Kaplan, Miller & Ciresi, and co-lead counsel for the plaintiffs, said, "Over time, the reforms induced by this case and in this settlement should help reduce card-acceptance costs to merchants, which in turn will result in lower prices for all consumers."
Others disagree. The Association for Convenience & Fuel Retailing (NACS) board of directors, rejects this settlement
noting it does not introduce competition and transparency "into a clearly broken market, it actually provides Visa and MasterCard with the tools to continue to shield swipe fees from market forces,” said NACS Chairman Tom Robinson, president of Santa Clara, Calif.-based Robinson Oil Corp.
“This proposed settlement allows the card companies to continue to dictate the prices banks charge and the rules that constrain the market including for emerging payment methods, particularly mobile payments," Robinson said. "Consumers and merchants ultimately will pay more as a result of this agreement — without any relief in sight."
So while a long-time battle is almost come to an end, time will tell how this will ultimately affect consumers that prefer to pay by credit.