MasterCard ordered to stop fees on credit cards

Credit card giant MasterCard has been ordered by the European Competition Commissioner to stop charging fees on cross-border transactions made on its MasterCard and its Maestro credit and debit cards.

These are fees that are charged on international transactions, and can vary between 0.4% and 1.2%. However, the European Competition Commissioner stated that these fees have been inflating prices for fifteen years, and wants to put an end to the fees.

MasterCard has been told to ensure that the fees are scrapped within six months, and if it fails to do this it could face fines of 3.5% of its global daily turnover. MasterCard officials have stated that they plan to appeal against the ruling. It claims that the fees are vital in facilitating transactions. These fees, known as multilateral interchange fees, are charged to retailers when international transactions are conducted.

The European Competition Commissioner stated that it is invariably the consumer that ends up footing the bill for these charges, stating: "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."

The British Retail Consortium has also welcomed the decision, with one official stating: "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."

With around 40% of all payment cards in the EU being MasterCard or Maestro the abolition of these fees could have a huge effect. However, some wonder whether the consumer will actually benefit from the move or whether it is just the retailers that will benefit.

Tom Smith
30th December 2007