Visa and Mastercard, by far the two largest credit card providers, are preparing to raise the fees merchants pay when accepting their cards, it has been reported.

Consulting company CMSPI suggest the decision could cost merchants an additional $502m annually, according to Wall Street Journal (WSJ).

The increase will be split between network fees, paid to Visa and Mastercard, and interchange fees to the bank that issued the credit card. Merchant fees are relatively small parts of the company’s revenues, but they hit low-margin businesses hard, often leading to price increases for consumers.

Interchange fees tend to go back into the credit card system, funding rewards schemes for certain cards. However, there has been criticism of this practice as creating a “a giant reverse Robin Hood” that transfers money from users of cards without rewards and those who pay in cash to people with often expensive rewards cards.

At the same time, GlobalData research suggests that both companies have seen massive net income growth over the last four years, as well as reasonable profit growth last quarter at 1.7% for Visa and 9.1% for Mastercard.

These fees are highly contentious both with merchants and regulators. In its Q2 2023 report Mastercard revealed that it has around £1.1bn ($1.4bn) worth of unresolved damages complaints outstanding in the UK alone following class-action lawsuits by merchants. The UK government is also investigating the possibility of capping interchange fees in line with similar EU legislation.

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