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"MasterCard will have to stop cross border transaction fees"

By admin | April 18th, 2008 | Credit Cards

Payment card giant MasterCard is being forced to abolish its cross border transaction fees, which are charges on international transactions made on the MasterCard and Maestro credit and debit cards. The order has been issued by the European Competition Commissioner. The fees that are charged by the card company on cross border transactions can be between 0.4% and 1.2%, but according to the European Competition Commissioner these fees have been used to inflate prices for many years and they need to be stopped.

According to recent reports MasterCard has been given six months to ensure that the fees are abolished, and if it fails to comply it could risk losing 3.5% of its global daily turnover in fines. However, MasterCard officials argue that the fees are vital in enabling transactions to take place, and officials from the card company are planning to appeal against the order.

The fees that are at the centre of the issue are known as multilateral interchange fees, and charged to retailers when international transactions are conducted. However, it is usually the consumers that ends up footing the bills due to prices that are then inflated by the retailers. The Competition Commissioner stated: “Consumers foot the bill, as they risk paying twice for payment cards – once through annual fees to their bank and a second time through inflated retail prices paid not only by cards users but also by customers paying cash.”

Around 40% of payment cards in the EU are MasterCard or Maestro, so the amount of money involved if the charges are scrapped could be a very significant amount. An official from the British Retail Consortium stated: “MasterCard has clearly been abusing its position to bolster its bottom line and retailers and their customers are bearing the cost. The sooner it accepts this ruling the sooner customers will benefit from these cost reductions.”

Tags: Credit Cards, debit cards, MasterCard

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