MasterCard changes fee structure on credit cards

MasterCard has decided to alter its merchant-fee structure as the card association works to capitalize on the growing number of reward credit cards.  However, the announcement is being met by opposition from retailers.

MasterCard's new program will establish a new merchant-pricing tier for its branded credit cards, marking a split from the old fee structure that relied upon three tiers.  That earlier setup had one tier for the most basic credit cards and two, higher-priced categories for credit cards featuring attention-grabbing rewards.

That basic tier will now be divided into two groups with a variety of different rates, and will take effect in June 2007.  MasterCard explains that the new pricing structure enables it to have a more sophisticated way to divide up its credit-card portfolio.

The complicated overhaul is outlined in a 100-page fee schedule, which makes it hard to tell if the new rates, on average, are increasing.  For example, the fees charged to large supermarkets seem basically the same as in 2006, even with the latest category.  Merchants in that category will continue to pay 1.32 percent on credit cards with the least rewards and 1.42 percent for credit cards that are heavy on the benefits.

Meanwhile, the National Retail Federation's general counsel challenged the new structure, stating that MasterCard is pricing each tier at the absolute highest possible in order to maximize earnings.  The trade group is a longtime critic of the interchange fees charged by thousands of card-issuing banks to merchants for credit- and debit-card acceptance and processing.

Visa and MasterCard set interchange fees based on a number of factors, such as the type of merchant and kind of card used for the transaction.

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Updated: 01-19-2019