Credit card customers from the European Union will now be able to benefit from a new regulation that allows them to pay lower fees on transactions when shopping in other EU countries.

Reports said this follows a decision by the European Commission to drop legal action against MasterCard.

In exchange for lifting threatened fines the world’s second largest provider of credit and debit cards has agreed to slash its multilateral interchange fees (MIF) for cross-border payments as well as repeal membership fee increases.

However, the firm said the cuts were only temporary, pending its appeal to Europe’s highest court.

The move has been criticised by some retailers as appalling and weak compromise.

But the EU competition commissioner, Neelie Kroes, hailed the decision and said: “This will mean lower charges for retailers accepting payment cards, which should in turn be passed on to consumers.”

In the same vein she advised other credit and debit card providers to follow suit, warning that she would continue to investigate the biggest provider’s business practices.