The Justice Department recently established as "unfair" the penalties imposed by American Express, MasterCard, and Visa to merchants that encourage alternative payment methods which are less expensive for their consumers or credit cardholders. Legal action had been taken against the three major credit card networks for their policy that prescribes "exclusive" payment methods that have made merchants and cardholders vulnerable.
For many years now, American Express, MasterCard, and Visa have put penalties in place for merchants if they do not make sure that credit cardholders follow the prescribed payment methods.
In such equation, the three major credit card networks have the power to impose payment methods that are beneficial to them and which best protect their interests in the long run. The problem with this is that merchants are left at the available control mechanisms of the major credit card networks. The merchants have little or no room to encourage other payment methods to attract more consumers for their own benefit as well. This is due to their fear of penalties when they supposedly violate contracts with the major networks.
Most glaring of all, the consumers cannot explore other ways of paying to merchants since the merchants are also bound to follow the orders of the networks that control them. What is so bad about this is that consumers cannot use less expensive payment methods to maximize their credit. They are also made to pay according to how major networks want them to, even if it meant losing money in surely less cost-effective ways of payment.
The penalty then is not only applied to the merchants that do not follow prescribed payment methods and that find it hard to attract consumers but also to the credit cardholders who are denied of their right to pay in a less expensive manner.
To concretize, major credit card networks do not allow for merchants to set their own minimum amounts for credit card purchases. Moreover, the networks deem it a violation of contract should merchants offer discounts to consumers who have alternative payment methods depending on their preference.
With these problems, the Justice Department already made sure that major credit card networks contracts restricting the right of merchants to offer incentives to their consumers who prefer less expensive payment methods will be abolished. The Justice Department is bent on protecting both the rights of merchants and cardholders that are often displaced by the demands of powerful networks.