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Visa and Mastercard to lower transaction fees in 2024

The federal government recently finalized its deal with Visa and Mastercard, the world’s two largest global payments processors. Under this deal, interchange fees businesses pay to credit card companies will be cut by up to 27%. Changes apply to small businesses, and non-profit organizations with less than $300,000 in Visa sales and less than $175,000 in Mastercard sales. This change will support small businesses that are facing higher costs due to inflation and increased interest rates.

A reversal from planned increases

At the beginning of 2023, it was reported that Visa and Mastercard were allegedly planning to increase the fees that merchants pay when accepting customers’ credit cards. These fees are commonly referred to as “interchange fees” and play a significant role in how credit card transactions work. 

The increase in these interchange fees implied that merchants may have to pay more when accepting credit card payments. As a result, these additional costs are typically transferred to consumers in the form of higher prices. 

The alleged plans to increase interchange fees followed a significant change to surcharge regulations introduced in October 2022. Following a lengthy class-action lawsuit led by businesses against Visa and Mastercard, along with a $188-million rebate to businesses as compensation for previously collected interchange fees, businesses were given the option to offset credit card processing fees by passing the surcharge on to consumers. While it was anticipated that consumers might feel the impact of this regulation, very few merchants welcomed the new regulation; instead, they would have preferred a significant reduction in the fees.

This new deal with lower transaction fees will come into effect in the fall of 2024 and shows the government's promise to support small businesses and aid in their growth. 

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