In a landmark decision, major credit card companies reached a $6 billion settlement with retailers over the fees credit card processors charge to process each swipe of a credit card. Businesses pay up to 3-4 percent of each transaction to accept credit card payments. These fees are known universally as interchange fees.
The settlement also allows for a change to the way the business has historically operated. In the past, credit card processors forbid businesses from charging credit card users more to use their cards. The result was a slew of gray areas that popped up to skirt the contractual obligation. Gas stations charged less for people who paid in cash, for example.
Now, businesses will have the ability to charge more to people who pay with a credit card. Commentators believe that making the fees more visible will push companies to drop their interchange fees. If higher prices for credit card users become widespread, some believe that credit cards will see usage declines due to higher prices.
According to the National Retail Federation, retailers spend as much as $30 billion to process credit cards. Many businesses claim interchange fees as their second-highest operating cost after employee salaries.
Few analysts expected the credit card industry to face a settlement any time soon. For years, retailers and credit card processors disputed the legality of the contracts that credit processors have in place. Retailers also sought lower fees, calling the credit industry a monopoly because of its power to influence the charges businesses pay to process credit cards.