U.S. consumers could start seeing additional fees for using a credit card at the register. A new settlement involving Visa, Mastercard and U.S. merchants could give businesses more power to charge fees depending on the credit card consumers use.
The settlement still requires court approval and could be contested by merchants. However, if approved, it could impact your wallet and your credit card rewards, according to The Wall Street Journal.
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Effects on consumers
For years, businesses have had the right to decide which credit cards to accept at their registers. However, those limitations have always had stipulations that say if a business allows one network’s card, it must allow all the networks’ cards.
For example, Costco currently only accepts Visa cards, and due to network rules, if it accepts one Visa card, it must accept all Visa cards.
The settlement could change that practice, however, allowing merchants to select which categories of cards they accept. While analysts say the categories should be broad enough that merchants are unlikely to start refusing any one specific category, they say midmarket cards could be lumped with premium cards.
More likely, however, are increased fees for premium cards. The Journal spoke to analysts who said the likely outcome is that consumers will see higher fees for using cards that offer rewards.
The settlement would allow different surcharges based on the category the card falls into. For example, a no-frills credit card may come with a 2.5% surcharge. Meanwhile, a rewards card that offers benefits such as cash back could see a surcharge of 3%.
What this means for stores and banks
Consumers are not the only ones likely to feel the effects should courts approve the settlement. It would also require banks to add clear visual markers to their credit cards to help consumers and merchants determine what category the card falls into.
For merchants, adding a surcharge could alienate consumers. According to the Journal, a recent survey found that roughly two-thirds of consumers would switch their payment methods if faced with a 3% to 4% surcharge.
However, a perk for merchants is that the settlement would require an average of 0.1% drop in interchange fees, which merchants pay every time consumers swipe their credit cards. Analysts don’t predict that this drop will affect annual fees or rewards for consumers.
Details on the settlement
All of the potential changes stem from 20 years of litigation in which merchants accused Visa and Mastercard of charging too much to accept their credit cards.
Specifically, the merchants accused credit cards and banks of conspiring to violate U.S. antitrust laws, including through the card networks’ collection of “swipe fees.”
