EU Cuts Deal To Cap Card Fees

Under an EU deal struck Wednesday (Dec. 17) between lawmakers and the EU Council, payment-card interchange fees will be capped at 0.2 percent for debit and 0.3 percent for credit transactions, Reuters reported.

The deal, which largely matches a revised version of the Payments Services Directive (PSD2) approved in 2013 by the European Commission, would also set limits on Visa and MasterCard’s “Honor All Cards” rule but would exempt commercial cards and three-party card schemes (such as American Express and Diners Club) from the caps.

But the new rules must be endorsed by EU governments and approved by the full European Parliament before they go into effect.

Under the deal cut Wednesday, interchange for cross-border debit-card transactions in the 28-nation Euro zone will be capped at 0.2 percent. For domestic transactions, member states can initially apply the 0.2 percent cap to the annual weighted average transaction value of all domestic transactions within the card scheme, but after five years the cap will change to a simple 0.2 percent or a fixed fee of at most five cents (€0.05) per transaction.

All credit-card interchange will be capped at 0.3 percent. Credit interchange fees within Euro-zone countries currently run as high as 1.8 percent.

While the caps won’t apply to commercial cards or three-party card schemes, retailers will have the right to reject any cards that don’t comply with the new caps — essentially outlawing the “Honor All Cards” rule that Visa and MasterCard use to make sure all cards branded with their logos will be accepted by all merchants accepting any of their cards.

That means “the shopper’s freedom to choose which payment card to use could be restricted if retailers exercise this right,” the European Parliament lawmakers admitted in a statement.