Visa & Mastercard merchants deal

Two weeks ago Visa and Mastercard struck a deal with millions of US merchants which is expected to save the merchants about $30 billion in swipe fees over the next five years. A few clients emailed to ask if we were concerned about the impact on Visa's margins. The short answer is, no.

The bulk of that $30 billion in savings will be coming out of the budget of credit card reward programs. Visa and Mastercard might set the swipe fees, but the banks and credit card providers get the majority of the money. It means that Visa's small portion of the overall fee charged is mostly safe and that the downward pressure on card swipe fees will be felt by the banks.

An interesting part of the legal agreement is that merchants will be able to charge surcharges to different card classes. Some premium credit cards come with higher swipe fees for the merchant, which they will now be able to pass on to the customer if they choose to do so. The argument from the card companies is that merchants should want big spending shoppers, so they should pay higher swipe fees for that privilege and not pass the higher charge onto the client.

This deal is specific to the US and will not apply globally. So your eBucks and Discovery miles are safe, for now.