Payment giants will cut fees on foreign-issued cards within the EU in a move that could eventually lead to lower prices for everyone.
Mastercard and Visa have ended their long-running battle with the European Commission after agreeing to cut the rate of a controversial card charge.
Both companies will cut interchange fees – which your bank imposes on the retailer’s bank – by around 40%.
Retailers will be charged at the new rate for purchases made in the European Economic Area (EEA) using Mastercard, Maestro, Visa, Visa Electron and V-PAY credit and debit cards from 19 October.
While this will initially benefit cardholders outside Europe, it should ultimately benefit all shoppers – provided shops pass on the savings they make.
At present, the lower fees are only due to apply for five years, but this could be extended in the future.
Interchange fees (along with many other charges) have long been hated by holidaymakers as it generally covers handling costs for the card-issuing bank.
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How charges are changing
Thanks to the deal with the European Commission, Visa and Mastercard will charge a 0.2% fee for non-EU debit card payments and 0.3% for non-EU credit card payments.
The move will bring fees in line with those charged for EU cards.
"This, together with our January 2019 decision on Mastercard’s cross border card payment services, will lead to lower prices for European retailers to do business, ultimately to the benefit of consumers," says European Commission’s Margrethe Vestager.
Earlier this year, Mastercard was fined €570 million by the European Commission after the latter claimed it stopped retailers from shopping around member states to find lower interchange fees.
Mastercard is also stuck in a £14 billion class action lawsuit over allegedly excessive transaction fees in the past after a decision by a competition tribunal to block it was recently overturned.