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Visa: Recommendations in the wake of recent anti-trust legislation
Visa, MasterCard, and American Express currently dominate the U.S. credit card market. This is partially due to the fact that customers know most establishments accept these major credit cards. However, due to a 2010 settlement with the Justice Department, Visa's monopoly on the market may soon end. Credit cards with lower fee scales may begin to make encroachment upon the market given that Visa and MasterCard now must allow store owners to "reveal processing fees to customers and offer discounts to those [customers] using cards that carry lower fees. Until now, shops and restaurants had been forbidden to tell customers about the fees -- or to offer discounts or rebates to people paying with cards carrying lower merchant fees" (Rubin 2010).
In the antitrust suit, merchants successfully argued that Visa and the other major credit card companies put a "completive straightjacket"...
Merchants were forced to acquiesce to Visa's demands, for fear of losing the credit card company's support and the many customers who automatically use these 'big name' credit card companies. Customers often did not acquire different credit cards from other companies, as they could see no advantage to do so, in terms of pricing at retailers. Visa accounts for 43% of all credit card expenditures in the U.S. And thus has a great deal of market leverage -- withdrawing from a business could be disastrous for the establishment's financial health (Rubin 2010).
In the wake of the antitrust settlement, as more and more consumers are trying to pay down credit card debt, they are trying to find ways to reduce their balances as quickly as possible. If they are now able to receive discounts from merchants by using more obscure…
References
Rubin, Courtney. (2010, October 5). Visa, MasterCard let businesses reveal processing fees.
Inc. Retrieved March 25, 2011 at http://www.inc.com/news/articles/2010/10/visa-and-mastercard-to-let-businesses-reveal-processing-fees.html
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