Will EU Credit Card Reform Hurt Consumers?

Merchants Payments Coalition has issued a press release outlining reforms in credit card fees paid by merchants throughout the European Union to process credit card payments, and suggesting that this move may spur similar reforms here in the U.S.

The release outlines the setting of a maximum “swipe fee” of 0.2 percent on debit cards and 0.3 percent on credit throughout the 28 countries of the EU.

Much like in the U.S., Visa and MasterCard dominate the European market, allowing them to inflate the fees banks charge retailers to process transactions when a customer swipes a card at their business. The European Union concluded that these financial institutions were “gauging” retailers and consumers in the EU and demanded an end to the practice.

Currently, as the release notes, a bank might charge a grocery store that sells $100 worth of groceries as much as $4 in fees if the customer chooses to use a credit card. Under these reforms, the same transaction will cost the grocery store 30 cents in Europe. By comparison, merchants in the U.S. – which has the highest credit card fees in the industrialized world – can pay as much as a dozen times more, or 4 percent, in swipe fees on their credit card transactions.

The news of changes in credit card fee regulations in the EU are giving hope to retailers in the U.S. that similar reforms may be coming their way soon.

“The EU’s just and thoughtful action should spur policymakers in the U.S. to take a closer look at these bloated fees which, without competition, just keep growing,” said Lyle Beckwith, a senior vice president at NACS, the National Association of Convenience Stores, and a member of the Merchants Payments Coalition. “We applaud the EU for standing up to the credit-card giants who continue to fleece American merchants and consumers.”