Retailers Win Following Credit Card Fee Court Defeat

Sep 19, 2018

MasterCard and Visa recently were slapped with a major setback in a UK multinational interchange fees (MIFs) lawsuit, following a British appeals court’s decision to rule in favor of retailers.

An appeals judge found that the interchange fees charged by Visa and MasterCard are unlawful and limit competition. This is a big deal because it change the way interchange rates are handled in the future.

Though this is considered a major victory for retailers, this isn’t the last word on the matter, as the case now will go before a specialty competition judge, known as the Competition Appeal Tribunal, to determine whether the credit card brands engaged in their restrictive practices because they were necessary for economic efficiency.

Time will tell. However, this could be major win for retailers, especially small and high risk merchant account holders that already are stymied by hefty rates and fees.

What are Interchange Fees?

Card companies set interchange fees which are then imposed by banks every time a customer swipes a credit card to make a purchase. During the transaction, the interchange fees are passed on to retailers. At issue is the use of so-called interchange fees, levied by banks at rates set by the card companies each time a consumer’s plastic is swiped at a register. Retailers are responsible for the interchange fees that are levied against them following the transaction.

What Happens Next?

Credit card companies contend that merchants benefit from their network and fees. The specialty tribunal will determine appropriate interchange fee levels for debit cards and credit cards if, in fact, there is any acceptable level.

Additionally, the court ruling gives merchants, even the smallest retailers, the opportunity to try and reclaim some of the  interchange fees they believe they had been overcharged by Visa and MasterCard over the years.

A Deeper Look at How Interchange Fees Are Determined

As previously mentioned, a merchant pays a set interchange fee to an issuing bank. Think of it as a financial incentive given to banks as a way to show appreciate for them issuing credit cards and manage customers’ accounts. Card companies began setting interchange fees more than 45 years ago, claiming it helped fund the risk and operating costs associated with credit and debit cards. As more credit card brands entered the market, rates rose and adjusted so they could compete. Today, in general, interchange fees are calculated based on the percentage of the sale plus a fixed fee. For example, 1.25% plus $0.10 per transaction.

Other factors, such as card brand and type, go into what results in the final interchange fee. For instance, face-to-face transactions pay lower rates than online or mobile purchases. More secure transactions, such as ones that require address verification and CVV codes, pay lower rates, as well.

The Final Word on the Matter

With all of these factors in mind, it is easy to see how high risk merchants, such as online and mobile businesses, could benefit from the court moving forward and capping interchange rates or eliminating them completely. Any kind of relief, like this, would be welcomed by high risk businesses that already paying higher than average rates and fees compared to their non-high risk counterparts.

As retailers pay close attention to what happens next in the courts, they also need to make sure they are accepting and processing credit and debit card payments in the safest, most efficient, and cost-effective way. If you are looking for a payment provider that specializes in high risk merchant accounts, then consider (EMB). It works with businesses of all sizes and backgrounds, including those with poor credit. Its online application process is simple and easy.

Let us help you get a high risk merchant account today!

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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