Sources familiar with the on-going negotiations between the Judicial Department and the two financial majors, Visa and MasterCard, say that the matter involving the acceptance of the new credit card rules that give merchants an option to request customers to use cheaper cards is almost coming to a close.
The result of the settlement which is due to arrive any time this week will not have a major impact on either of the two finance majors. It would, however, be considered as a setback to the credit card industry which is as it is being subject to a lot of rules and regulations causing it to lose money hand over fist. This would be a major victory for the merchants who have been fighting hard to eliminate the high transaction fees they have to pay banks when customers use their credit cards to make purchases.
The issue on hand is the varying fees being charged by the banks to the merchants based on the credit card being used. While the fees associated with non-rewards cards are low, the fees for card with airline rewards and cash back offers are very high, thus irking the traders. To add to their woes, once a merchant agrees to accept the card of a particular bank, he has to accept all their cards, irrespective of whether they are reward cards or not.
The investigation being conducted by the Judicial Department currently involves the various rules by the bank governing the merchants which prevent them from asking the customers to use other cheaper forms of payment while purchasing goods from them. In the current scenario, this practice termed "steering" is permissible only in certain cases.
During the course of this investigation, the Judicial Department unveiled the fact that the interchange fees being charged by American Express is much higher as compared to any other bank. However, the current settlement does not take this problem into consideration, thus giving the government an opportunity to take action against the bank. Justice Department's spokesperson failed to comment on this issue.
The Chief Executive Officer of Visa, Joseph Saunders said that the company and the Justice Department were involved in constructive negotiations to arrive at a decision. Once the result of the settlement is out in the open, the merchants would be given better permissions by MasterCard and Visa to give customers choosing the pay using cheaper options an incentive they deemed fit.