UPDATE 4-US GAO-Hard to see consumer savings from card fees

* Merchants fee limits could raise consumers' costs-GAO

* Limit on fees could hurt merchants-GAO

* Benefit for consumers is hard to measure - GAO

* Shares of MasterCard rise, but Visa falls (Adds Merchants Payments Coalition comment, updates stock price)

By Juan Lagorio

NEW YORK, Nov 19 (Reuters) - U.S. congressional auditors said it would be difficult to identify savings to consumers if the government imposed lower credit-card charges on merchants.

The report released on Thursday by the Government Accountability Office diminishes financial services industry concerns about legislation to limit such interchange fees.

Earlier this year, when Congress passed a law limiting increases in credit-card fees and interest rates to consumers, merchants initiated a campaign to curb the fees that retailers such as supermarkets and convenience stores pay to banks every time a customer uses a credit card.

Congress is discussing two proposals to limit these interchange fees, which are set by credit-card networks Visa Inc (V.N) and MasterCard Inc (MA.N) but are collected from retailers by credit-card issuers such as Citigroup Inc (C.N) or Bank of America Corp (BAC.N).

"If interchange fees for merchants were lowered, consumers could benefit from lower prices for goods and services," the GAO said in the report, "but proving such an effect is difficult, and consumers may face higher costs for using their cards."

Merchants contend the fees, which range from about 1.6 percent to 2.5 percent, unfairly cut into their margins and drive up prices for consumers. They also complain that banks collude to set the fee structure and block them from being able to negotiate lower fees.

Financial services companies argue that the payments are based on a pricing system that benefits businesses and their customers. Visa and MasterCard have also said merchants do have the opportunity to negotiate lower fees.

The GAO said any regulation of interchange fees would suppose "challenges for implementation, such as determining at which rate to set, providing more information to consumers, or addressing the interests of both large and small issuers and merchants in bargaining efforts."

"It implies that they (lawmakers) are not going to put too much pressure on interchange fees," said David Koning, an analyst at Robert Baird & Co.

A $50 BILLION BUSINESS

U.S. interchange fees rose to $48 billion last year from $42 billion in 2007 and were up 33 percent from 2006, but the GAO said that was because consumers used their cards more.

The report also said that some consumers have benefited from competition in the credit-card market, and that merchants' benefits of accepting credit cards include increased sales and reduced labor costs.

"A limit on interchange fees could affect merchants negatively if this option led to decreased overall retail sales or available credit," the GAO report said.

A recent study by the Merchants Payments Coalition -- which represents more than 2 million retailers, supermarkets and convenience stores -- said U.S. interchange fees were up to six times greater than those in other countries.

The Electronic Payments Coalition, which represents payment card networks and financial services companies, said interchange fees in the United States were lower than in countries such as Italy, Switzerland and Japan.

"Today's GAO report concludes that consumers could be harmed if Congress acts to lower what merchants pay to accept debit and credit," the Electronic Payments Coalition said in a statement.

But the Merchants Payments Coalition said in another statement that "unless Congress acts to bring competition and transparency into the interchange system, the big banks and credit card companies will keep lining their pockets at the expense of small businesses and consumers nationwide."

MasterCard shares rose 0.8 percent to $229.11, while Visa fell 0.25 percent to $80.19. MasterCard's stock is up 62 percent this year, while Visa is up 57 percent. However, analysts said the upward trend has been limited by the risk of tighter regulations in the payments industry.

"The lack of any significant ammunition in the report to support interchange regulation should be positive for Visa and MasterCard," UBS analysts wrote in a research note as they reiterated their "buy" rating on the stocks. (Reporting by Juan Lagorio; Editing by Gerald E. McCormick, Lisa Von Ahn and Richard Chang)