An assumed settlement on impending litigation may allow merchants to charge customers a fee for conducting transactions with Visa and Mastercard credit cards.

The lawsuit brought on by Safeway Inc., Kroger Co., and Payless ShoeSource allege that Mastercard and Visa colluded together in keeping the merchants solely responsible for all interchange fees, much to their chagrin. Many retailers go ahead and charge a fee to their customers anyway to recoup costs, a violation of Visa and Mastercard’s terms of service.

Cost of a Settlement

The presumed settlement could cost the defendants up to $12 billion and require the nullification of the no-surcharge rule, something many merchants would embrace. But this begs a question: will consumers begrudgingly pay these surcharges, or start carrying around more cash? The implications of this could be huge and could stagnate or reverse any growth that credit card transactions have experienced recently.

A Wise Move

Consumers preferring Discover or American Express needn’t worry too much. Their policies discourage surcharges unless the merchant requires surcharges for all accepted cards, which in effect prevented surcharges if the merchant accepted the near universal Visa or Mastercard.

Some analysts believe that removing the surcharges that cut into a merchant’s profits will in turn encourage merchants to lower prices, which in theory, might be true, but I could imagine the vast majority of businesses simply being happy with making an extra $0.41 per purchase.