e're approaching the end of the year, and Visa and MasterCard are in the process of negotiating with acquirers and their retail merchant customers over signature debit card transaction fees for 2004.

Industry analysts say that larger retailers, such as Wal-Mart and Sears, Roebuck and Co. will have more influence on the discussions with the credit card associations than smaller, "mom and pop"-style retailers, and this influence will probably result in the larger retailers getting lower transaction fees, while the smaller retailers may not get as good of a deal.

As part of their April 2003 settlement in the class action lawsuit with retailers over these debit card fees, Visa and MasterCard agreed to abolish their honor all cards policy (which requires merchants to accept all types of Visa or MasterCard cards) and lower debit interchange rates through the end of 2003.

The credit card companies have typically made changes (mostly increases) to their interchange rates at least once or twice a year.

However, Visa recently told its card issuing banks that it will not modify debit card interchange fees on Jan 1, 2004 as planned, because it doesn't want to disrupt the holiday shopping season.

At press time, MasterCard had not yet agreed to do the same.

According to the terms of the settlement, Visa and MasterCard must alert merchants 45 days before they make any changes to interchange rates.

A source close to the deal said Visa is trying to get Wal-Mart to accept only Visa-branded debit cards, the Wall Street Journal reported. And Lloyd Constantine, who represented the retailers in the previously settled lawsuit, was quoted by the Wall Street Journal as saying that Visa "is offering massive amounts of money" to retailers or offering to cap or reduce credit card fees in order to ensure they continue accepting signature debit cards.

Many people think the negotiations between merchants and the credit card companies could continue for months.