Visa and Mastercard earlier this week agreed to a settlement It has partnered with U.S. merchants and promised to lower the fees that stores have to pay to process credit card payments, at least in the short term.
The settlement paves the way for retailers to impose additional fees on cards with high swipe fees, potentially making premium cards with expensive rewards programs more expensive to use. Some have speculated that the change could affect credit card benefits or allow merchants to pass savings on to customers.
But other experts are skeptical that this will result in any significant changes for credit card users.
The settlement appears to have “nothing to do with credit card holders,” he said. michael kinsmanHe is a professor emeritus of finance and accounting at Pepperdine University in California and runs a CPA firm in Laguna Beach.
What did the settlement offer say?
Visa and Mastercard denied wrongdoing but agreed to make a number of changes in the short term as part of the settlement. among them:
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- The companies will lower exchange rates (the fees merchants must pay to process credit card payments, also known as “swipe rates”) by at least 4 basis points (0.04 percentage points) over three years.
- The swipe rate must be at least 7 basis points lower than the current average over the next five years.
- Merchants can more easily direct customers to other payment methods and surcharge premium credit cards with higher swipe fees.
The settlement still needs court approval and the changes will not take effect until late 2024 or 2025, the paper said. Statement from Mastercard.
What does this mean for credit card holders?
Patrick PayneThe University of Arizona, Tucson associate professor of personal and family financial planning doesn’t expect “drastic changes” from the settlement, but he believes it could lead to more expensive premium cards.
Cards are already expensive. The Chase Sapphire Reserve, for example, charges a $550 annual fee in exchange for benefits such as airport lounge access and a $300 annual travel credit. The annual fee for the American Express Platinum Card is nearly $700.
Premium cards are also expensive for merchants.National Retail Federation addresses swipe fees Average approximately 2% per transaction However, it can be up to 4% for premium points cards.
If this payment is approved, merchants will be able to charge customers additional fees for using premium Visa and Mastercard credit cards.
However, it is not clear whether stores will do so. want According to the company, these customers will be charged an additional fee. Lulu Wang, assistant professor of finance at the Kellogg School of Management in Evanston, Illinois. Forcing certain customers, especially high-paying customers, to pay extra fees can strain relationships and negatively impact your business.
“People are talking about some changes that could be made to retailers, but those changes seem like a huge pain to implement,” he said.
“If they tried to do that, their relationship with their customers would be absolutely terrible. They would have egg all over their faces,” Kinsman added.
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Will stores pass on the savings to consumers?
Retailers who accept Visa and Mastercard are expected to: Save at least $29.79 billion According to a statement from one of the law firms representing the U.S. retailer in the lawsuit, for five years after the settlement,
In theory, by lowering prices, sellers could pass some of those savings on to customers. This can be especially prevalent among small and medium-sized businesses, said Payne of the University of Arizona.
“We might be able to offer more competitive prices to attract people from big box stores,” he says.
But other experts say consumers shouldn’t get their hopes up.
“Most people probably don’t know about[the settlement]anyway,” said Kinsman, a professor emeritus at Pepperdine University. “So why as a merchant should you pass that cost on to your customers?”
What about Visa and Mastercard?
Beverly HartzogThe author of “The Debt Avoidance Plan: How to Get Free of Credit Card Balances, Improve Your Credit Score, and Live Debt-Free,” said she doesn’t expect much change with credit card issuers after the settlement. Ta. She said a three-year and five-year period gives companies little time to make significant changes.
“It’s like trying to turn a giant cruise ship around,” she says. “That takes a lot of time. Sometimes, by the time you’re ready to pivot, the market has changed again.”
Her warning? If one credit card issuer decides to make changes after a settlement, whether it’s increasing annual fees or deferring certain perks and perks, other credit card issuers are likely to follow suit.
“I would focus on the first domino,” Herzog said. “And at this point, I don’t expect that, just because this (settlement) is not completed. Even if it were, it would be a temporary solution, and things could be resolved within a few years.” will return to normal.”
Visa plans to maintain “access to compensation and credit” even if the settlement is approved, according to a statement citing Kim Lawrence, the company’s president of North America. Released earlier this week. Spokespeople for Visa and Mastercard did not immediately respond to requests for comment sent after regular business hours Friday.
