On Monday, the Department of Justice announced a settlement with Visa and Mastercard that will give merchants a potential tool for fighting back against interchange fees, by offering discounts to customers using cards with lower rates.

Interchange fees (more info here) cost merchants about $35 billion annually, from 1-2% of the purchase price of each credit card transaction. Interchange fees vary depending on a number of variables, such as the card brand, the type of transaction, and so on, so some cards (such as rewards cards) are much more expensive for the merchant to accept than other cards. Until Monday, merchants were contractually forbidden from discriminating between types of cards. A merchant had to charge the same price no matter what type of card was used.

This may be changing. Visa and Mastercard were sued by the DOJ and several states for violating antitrust laws, and they recently settled the lawsuit. Visa and Mastercard agreed to allow merchants to offer discounts to consumers who use cards with cheaper interchange rates. Unfortunately, the settlement does not allow merchants to levy a surcharge on credit cards. Of course, there is no economic difference between a discount and a surcharge. But practically speaking, its easy to see why Visa and Mastercard agreed to allow discounts and not surcharges: it will be difficult for merchants to tell the difference between cheaper and more expensive cards.

Nevertheless, we think this is a step in the right direction. If merchants can find a way to offer a discount, it may make consumers think twice about which card they use, and thereby pressure credit card companies to keep their interchange rates from rising.

And while merchants think about how to battle Visa and Mastercard on the interchange front, Feefighters offers merchants a tool to decrease the processing costs on their own merchant accounts. Slowly but surely merchants are learning how to fight back against credit card processing costs.