MasterCard criticised for cross-border fees

The European Commission has criticised MasterCard for charging cross-border fees on credit and debit card transactions. It warned that if MasterCard did not remove the fees within 6 months, it will charge fines on a daily basis of up to 3.5% of worldwide turnover.

The fees, known as multilateral interchange fees, apply to both MasterCard credit cards and Maestro debit cards and range from 0.4% to 1.2% of a transaction. The company has said that the fees play a major role in assisting with transactions.

It is expected that MasterCard will challenge the ruling.

Neelie Kroes, a spokesperson for the European Commission said that the fees make it more costly for retailers to accept cards and that these costs would be passed on to customers.

She added that consumers bear the cost as they risk paying twice for payment cards, once through annual fees to their bank and a second time through inflated retail prices paid not only by cards users but also by customers paying cash.

Ms Kroes said that other credit card companies should also take note of the Commission’s behaviour towards Mastercard and act accordingly. The investigation into fees charged by Mastercard’s rival Visa would re-open in 2008.

The decision was welcomed by The British Retail Consortium (BRC) who said that the fees cost retailers hundreds of millions of pounds every year. Kevin Hawkins of the BRC said MasterCard has clearly been abusing its position to boost its bottom line and retailers and their customers are footing the bill.

It is thought that approximately 40% of all payment cards in the EU feature either Mastercard or Maestro logos.

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