Recent weeks have seen two major credit card companies come under fire for the excess charges they levy against customers. First there was MasterCard, who were criticised for their high transaction fees abroad. The European Commission dropped legal action against the group after the card provider agreed to lower its multilateral interchange fees (MIF) for cross-border purchases. The company also said they would cut down ‘membership’ fees in an effort to avoid heavy fines from the Commission.

However, the group said that the cuts were only temporary, as they will appeal to Europe’s highest court. Despite some retailers calling the decision a ‘weak compromise’, the reaction to the lowered fines has mostly been positive. Speaking at the beginning of April, Neelie Kroes, the EU competition commissioner, remarked: "This will mean lower charges for retailers accepting payment cards, which should in turn be passed on to consumers." She also added that other companies, such as Visa, would be put under the same scrutiny as MasterCard and should expect the same treatment. "I have no intention that today's announcement will allow Visa to benefit at the expense of MasterCard," she added, "We are determined to keep a level playing field in these markets."

Sure enough, the news was announced a few days later that Visa’s business practices were under investigation. While MasterCard cut its MIF to 0.30% for each transaction after the settlement, Visa’s MIF was still at an average of 0.61%, even after the company claimed it had cut its rates. The European Union brought anti-trust charges against the company, saying that their charges for transactions abroad were too high for European competition rules.

Multilateral interchange fees are set by the credit card company and only apply when a customer buys something in a different country and therefore the merchant’s bank is in a separate country to that of the account holder. This also applies to transactions within the same locality in nine European countries. The fees are paid from the merchant’s bank to that of the cardholder as part of the purchase and are not received by the card company. The charges are the same for each company, whether they are large or small, and critics are highly concerned about the costs being forced on customers and retailers alike. Many shoppers use credit cards when abroad to minimise the damage of incidents like fraud or theft but using cards in foreign countries is becoming more and more expensive.

Many hope that Visa and MasterCard will reach some kind of agreement with the European Commission over fees and that they will be permanently lowered. The head of the retail lobby Eurocommerce, Xavier Durieu, remarked that companies only need to charge 0.01-0.05 euro per transaction for the issuing banks to still make a profit. The British Retail Consortium has also estimated that UK banks could save up to £15 million every year if card membership fees are reduced. With the recession still affecting millions of Europeans, it is hoped that the reduction in charges will affect consumer spending and help boost the European economy.