Friday, Feb 15th 2019

Visa and MasterCard prepare to raise fees

Update

Visa and MasterCard are planning to exert their pricing power by raising the fees on credit and debit cards, putting a new strain on retailers.

Purchases with plastic are about to get costlier for merchants and consumers.

Credit-card companies are hiking fees that U.S. merchants will pay to process transactions, a move likely to intensify relations between many businesses and card networks.

How It Affects Merchants##

Visa and MasterCard, the two biggest U.S. card networks, are planning to raise "interchange fees" in April. These are the fees that merchants pay to banks when consumers shop with the cards they issue.

In some cases, returned merchandise bought with MasterCard debit cards will get more expensive for stores, with merchants not getting reimbursed for the interchange fee from the initial purchase.

Also, they're planning to raise the fees that card networks charge financial institutions for processing card payments on behalf of merchants. So both merchants and banks will be forced to pay higher fees.

How It Impacts Consumers##

Merchants often raise the prices we pay after fee increases like these, in an attempt to protect their own profits. We believe roughly 1.0-2.5% of prices for goods and services go to cover card fees.

As consumers, we often pay for those fees whether we pay with cash or card. They're just very minuscule on a per-transaction basis (a $10 purchase has only 10-25 cents fee baked into it). Hence we rarely notice them.

As a result of these fee hikes, expect to pay slightly more for goods and services at smaller merchants like your local convenience store. They're often too small to negotiate a better deal with Visa and MasterCard.

Takeaway##

Card fees have long been a point of contention as consumers shift spending from cash to cards. Merchants say card-company charges are too high and that there is little they can do in the face of price hikes. They have little bargaining power.

While tough for merchants, we believe these fee hikes are a clear demonstration of the pricing power that Visa and MasterCard have. It makes them incredibly high-quality businesses in our view.

As of this writing, V was a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.
Back to Research ↗

Learn with titan

Investment articles and resources

Become the smartest investor you've ever been through straightforward, easy-to-read investment articles.

Paying With Cryptocurrencies: 5 Things You Can Buy Using Bitcoin and Other Coins


When Was The Stock Market Created?


What Is Securitization? Definition and Examples


What is a Crypto Wallet & How Does It Work?

Let's Get Started

Ready to become a client?

Create an account with us in two minutes.

Or scan to get the app

We're building the best investment platform, ever

Titan Global Capital Management USA, Inc ("Titan") is an investment adviser registered with the Securities and Exchange Commission (“SEC”). By using this website, you accept our Terms of Use and Privacy Policy. Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities. Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections are hypothetical in nature and may not reflect actual future performance. Account holdings are for illustrative purposes only and are not investment recommendations. The content on this website is for informational purposes only and does not constitute a comprehensive description of Titan’s investment advisory services.

Refer to Titan's Program Brochure for more information. Certain investments are not suitable for all investors. Before investing, consider your investment objectives and Titan’s fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. Brokerage services are provided to Titan Clients by Titan Global Technologies LLC and Apex Clearing Corporation, both registered broker-dealers and members FINRA/SIPC. For more information, see our disclosures. Contact: 508 LaGuardia Place NY, NY 10012. Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice. Check the background of these firms on FINRA's BrokerCheck.

© Copyright 2022 Titan Global Capital Management, Inc. All Rights Reserved.