Monday, July 16, 2012

The Credit Card Settlement and You

By now, you should be aware of the proposed settlement involving both Visa and MaterCard (see here, and here for the NYTimes update ).

Based on the summary at Payments News, there are some things to note and be aware of.  First, here are the three elements of the settlement:

  • Reduced credit card interchange for a period of eight months.  This should result in a drop in merchant fees for the "affected class."
  • A change in card brand rules to allow merchants to surcharge under certain conditions.
  • An agreement whereby the brands will meet with groups of merchants to negotiate interchange rates collectively.

Each of these has potentially significant impact for Higher Ed institutions and their card programs.

The reduced fees should show up in lower merchant fees.  That is, the plan is for acquirers to pass along those savings to merchants.  If the settlement goes through, and if the interchange rate reduction includes all merchants (which is unclear), you want to check that you receive the savings.  The savings may not be large, but every little bit counts.

The surcharging rules may open the doors to re-consideration of card acceptance at many institutions.  It is no panacea, and adding a percentage (assuming that will be allowed) is not very customer-friendy.  Nevertheless, surcharges may allow more schools to take cards (or at least to also accept Visa) than in the past.

Lastly, there may be room to negotiate a "Higher Ed" interchange rate with the card brands.  This is a long shot, but I know from personal experience that a lot of schools and their associations have expressed interest in talking to the card brands about a lower interchange fee for Higher Ed based on the lower risk of the transactions.  We'll have to see what happens here, but this may be the greatest impact on Higher Ed.

Stay tuned.  If this settlement goes through, it could be a significant change for Higher Ed and payment cards.

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