The ongoing Visa and Mastercard swipe fee lawsuit drama had a big development this week when a U.S. judge granted preliminary approval for a revised $38 billion settlement. One included item was a change to the “honor all cards” rule that would give merchants the ability to stop accepting certain types of cards.
What will this mean for consumers who enjoy earning points and miles? Get the details, and see what industry insiders have to say.
[Read: ]
All We Know About the Settlement
with merchants over the amounts they were charging to process payments, which would finally wrap up litigation that dates back to 2005.
But another item included in the settlement involves a change to the longstanding “honor all cards” rule. This is the practice by which merchants have to accept all cards with a Visa and/or Mastercard logo — or none at all. If this version of the settlement goes through, merchants would have more flexibility regarding which cards they accept.
Instead, cards would be classified into three main categories: standard, rewards and commercial. Then, merchants could choose which card categories they want to accept or add surcharges to cover higher-cost cards. Because premium rewards cards (the ones that usually come with an and souped-up benefits) typically charge higher interchange fees, those cardholders may be turned away or asked to cover an extra fee.
[Read: ]
What It Might Mean for Cardholders
If — and that’s a big if — this settlement is approved and becomes official policy, merchants may choose not to accept rewards cards or might charge those customers more. This could impact a broad range of popular cards, such as the , the and the .
Considering that premium cardholders tend to be higher spenders, it’s not likely many merchants would actually go through with this even if they’re allowed to, says Matthew Goldman, founder of fintech consulting firm Totavi and publisher of the CardsFTW newsletter. “I think most chains and higher value stores will understand that they shouldn’t upset and turn away their best customers.”
But theoretically, consumers could be impacted by merchant outliers who decide they want to reject cards that cost them more to process.
Doug Kantor, Merchants Payments Coalition executive committee member and National Association of Convenience Stores general counsel, says he’s not convinced the settlement in its current form will have any meaningful change at the consumer level — for better or worse.
“They will still be paying huge hidden fees,” he says. “It won’t change their experience in stores at all.”
On the merchant side, for which he is an advocate, Kantor believes that card issuers will find loopholes to get around category acceptance rules.
What’s Next?
While Mastercard and Visa seem eager to move forward with the new settlement, groups like the National Retail Federation feel it doesn’t go far enough to save merchants or consumers money or provide enough acceptance flexibility. “A settlement is years away and we think it will be overturned,” says Kantor.
Goldman thinks what we’re hearing now is much ado about nothing. “Large merchants love to complain about card processing fees, but it’s not really like they want more cash in their stores — cash is expensive and dangerous,” he says. “Merchants are willing to pay more for cards that are held by consumers who spend more, as premium cardholders do.”
It’s unlikely this saga will be resolved anytime soon. In the meantime, keep on earning those rewards shopping at your favorite merchants while the two sides continue to fight it out.
More from U.S. News
originally appeared on
