Visa and Mastercard Reach Settlement on Swipe Fees

Visa and Mastercard have come to an amended agreement with merchants over a long-running antitrust lawsuit concerning swipe fees.

This proposed settlement might give some merchants the option to decline certain Visa and Mastercard transactions or impose extra fees for using those cards at checkout.

Here’s what you should know about this development and its potential impact on your credit card rewards.

Understanding the Visa and Mastercard Agreement

In the U.S., merchants, like store owners, typically pay an interchange fee to the banks issuing credit cards every time a customer uses one. These fees generally hover around 2% per transaction and are shared between banks and payment networks, such as Visa and Mastercard, to offset processing and fraud prevention expenses.

Part of these fees often finances the rewards programs favored by card issuers.

Fees set by card-issuing banks can vary depending on the type of credit card used, with more premium cards incurring higher fees, but they also offer better rewards—like earning more than 1 point or mile for every dollar spent.

For years, the “honor all cards” rule has prevented merchants from refusing to accept premium cards that come with hefty interchange fees. Under this rule, if a merchant accepts one type of Visa or Mastercard, they must accept all types, benefiting consumers by allowing them to use their preferred rewards cards wherever the Visa or Mastercard logo shows up.

If a federal court approves this new settlement, it could result in a reduction of average credit card interchange fees by about 0.1 percentage point over five years and cap the standard consumer card interest rate at 1.25 percent for eight years. This essentially means lower fees for card issuers to fund their rewards programs.

A significant change for consumers involves the “honor all cards” rule being altered. Merchants may be allowed to selectively accept certain Visa and Mastercard products based on the interchange fees they incur. This could mean, for instance, that they opt not to accept premium cards like Visa Infinite or World Elite Mastercard.

Additionally, merchants could impose a surcharge of up to 3% (within state law and network rules) to cover the costs associated with premium credit card transactions, which would be added to the total amount due from consumers.

It’s worth noting that American Express cards remain unaffected by this news.

How Does This Differ from the Credit Card Competition Law?

Well, it does. The Credit Card Competition Act, another piece of legislation, would require major issuers to support at least two unaffiliated networks on most credit cards, allowing merchants to route transactions beyond just Visa or Mastercard.

In contrast, this settlement is a private agreement focused on fees, card acceptance policies, and surcharges within the Visa and Mastercard frameworks, with no Congressional involvement.

If the CCCA is enacted, it could diminish card issuers’ ability to offer lucrative rewards, potentially more significantly than this court settlement.

What Does This Mean for Credit Card Rewards?

Honestly, I’m not quite sure yet. But, I don’t think change will happen overnight.

If this settlement is approved, small businesses—especially those with slim profit margins—might start displaying messages at checkout indicating that certain premium Visa or Mastercard cards are not accepted or that they will carry additional charges. This could make you reconsider your future credit card choices.

The decision about which cards to accept and any applicable fees rests with the merchant—like a local coffee shop owner. If they stop accepting your favored rewards card, you could always check out other options.

Right now, it’s tough to say if this will become a widespread practice or if it will be confined to specific sectors.

What’s the Timeline?

For now, there won’t be any immediate changes at checkout or with your favorite rewards credit card. This is just a proposed settlement that still requires court review and approval. It may take some time—maybe months or longer—before any new acceptance and pricing rules are finalized for credit card usage.

Conclusion

If this settlement goes through, some stores might refuse to accept premium Visa and Mastercard products that usually grant the most rewards, or they may add extra fees.

American Express is not part of this potential change and likely won’t experience any immediate shifts. We’ll continue to keep an eye on the court proceedings and share updates on any new developments.