Credit card provider MasterCard has agreed to cut the fees it charges European banks for cross-border transactions.
In a deal with the European Commission, banks will pay a lower fee to MasterCard to be part of its network from 1 July 2009. The European Commission had, in December 2007, ruled that MasterCard’s cross-border fees breach EU anti-trust rules and must be changed. However, despite the company’s agreement to the new lower fees, the move could be only temporary, as MasterCard plans to appeal.
MasterCard to appeal EU ruling
Javier Perez, president of MasterCard Europe, said, ‘We do not believe this level of interchange is adequate to sustain strong competition in the European payments industry or to encourage the investment and innovation that will be required to provide European consumers and merchants with better payment products in the future. That is why these rates are only interim, and why we are pursuing our appeal in the European Court of First Instance.’
EU moves in consumers’ favour
Neelie Kroes, EU Competition Commissioner, commented, ‘In practice these fees simply became a hidden source of revenue for the banks. MasterCard could not justify their level. [..] Europe is rapidly making the transition from notes and coins to plastic money. That journey is about efficiency and convenience for both consumers and retailers and moving towards a truly Single Market for payments. Today’s announcement is the next step in that journey by ensuring that charges are directly related to the benefits of using payment cards and by ensuring transparency.’
She added, ‘I would also like to remind you that we are currently investigating Visa’s business practices. I have no intention that today’s announcement will allow Visa to benefit at the expense of MasterCard – we are determined to keep a level playing field in these markets.’
Get the best credit card for use abroad
Martyn Saville, credit card expert at Which?, said: ‘These reduced fees will hopefully lead to lower prices for consumers as banks pass the savings on to retailers, leading to lower prices for shoppers. With one or two notable exceptions, credit card users already pay hefty fees for using their credit card abroad. Nationwide‘s recent decision to pass on Visa charges to consumers holidaying outside Europe was disappointing, and leaves only the Post Office that doesn’t charge its credit card customers extra for making purchases worldwide.
For European spending, credit cards from Nationwide and Saga are still worth considering, as are a select few prepaid cards, including the Global Traveller card from Caxton FX, which doesn’t charge a fee for either purchases or cash withdrawals overseas.
For details of the Best Buy credit cards to use on holiday, check out the Which? credit card finder.
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