Visa Inc and MasterCard Inc are moving closer to a settlement in a seven-year old case named In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation. Most analyst are predicting a settlement and possibly by the end of July. One of the possible settlement outcomes could be a reduction in interchange fees which is expected to have a negative impact on bank stocks. If your holding bank shares of major card issuers, be warned. If you are a small merchant, we will keep you posted here about what it means to you and anything you will need to do.

Effective immediately, registration is no longer required for merchants that accept MasterCard who choose to accept Debit MasterCard Cards only, Other Cards only, or both Debit MasterCard Cards and Other Cards. At this time, Visa still requires registration of merchants who wish to limit acceptance to debit or credit only.

Visa and MasterCard have agreed to new changes that will allow merchants greater flexibility to steer their customer’s payment choice.

The Dodd-Frank financial regulations signed into law in July allow merchants to set a $10 minimum card purchase. Now, announced in a Justice Department consent decree, Visa and MasterCard have agreed that merchants can:

• Offer consumers an immediate discount or rebate or a free or discounted product or service for using a particular credit card network, low-cost card within that network or other form of payment;
• Express a preference for the use of a particular credit card network, low-cost card within that network or other form of payment;
• Promote a particular credit card network, low-cost card within that network or other form of payment through posted information or other communications to consumers;
• Communicate to consumers the cost incurred by the merchant when a consumer uses a particular credit card network, type of card within that network, or other form of payment.

Visa and MasterCard can still require merchants to accept all cards within their brands. However, now merchants will be able to offer discounts for lower-cost cards or other forms of payment. Of course, merchants may refuse to accept card payments.

American Express did not settle.

MasterCard Inc., the world’s second- largest credit-card network, rose the most in three months of New York trading after beating analysts’ profit estimates by raising the price of processing international purchases.   Along with cost-cutting, it appears from its most recently announced increase for April 2009 that raising prices is the strategy MasterCard will continue.

The continuing adoption of credit and debit cards worldwide has cushioned the effects of a U.S. slowdown.   Visa and MasterCard, which collect fees to shuttle payments between financial institutions, are insulated from rising credit-card defaults because the networks process transactions and don’t make loans to cardholders.  Banks that issued Visa and MasterCard to cardholders have reported declining profits as lending charge-offs rise.

Read more at Bloomberg.com