The $30 billion settlement reached Tuesday between merchants and credit card giants Visa and Mastercard could make using premium credit cards more expensive.
Rate tables revealed as part of the settlement show that customers using cards like Visa Infinite, Chase Sapphire Reserve and Mastercard World Elite will need to pay more in swipe fees charged to merchants by credit card companies.
A $100 transaction at a restaurant will result in a swipe fee of $2.60 for a diner using a Visa Infinite card versus $2.10 for a person using a regular Visa Rewards card. According to analysis by Bloomberg News.
Visa Infinite charges an annual fee of up to $525 for benefits and perks including travel discounts, gym memberships, dining offers and subscriptions to entertainment providers.
The Chase Sapphire Reserve, which comes with a $550 annual fee, includes a welcome offer of a $300 travel credit plus 60,000 bonus points after you spend $4,000 on purchases within the first three months.
Tuesday's settlement will allow merchants to charge consumers more for using elite cards — though some may choose not to for fear of a backlash, according to experts.
Merchants have long complained that Visa and Mastercard required them to accept all of their credit cards at checkout.
Credit card companies say elite accounts encourage shoppers to buy more than they normally pay because of inducements and incentives.
But merchants have long complained that they are not allowed to charge elite cardholders additional fees.
Merchants have accused Visa and MasterCard of charging inflated swipe fees, or interchange fees, when shoppers use credit or debit cards, and are prevented by “anti-steering” rules from directing customers toward cheaper payment methods.
Swipe fees typically include a small flat fee plus a percentage of the total sale amounts, and average about 1.5% to 3.5% per transaction according to Bankrate.com.
Under the settlement, Visa and MasterCard will reduce withdrawal rates by at least four basis points – 0.04 percentage point – for three years, and guarantee an average rate that is seven basis points lower than the current average for five years.
Both card networks also agreed to cap rates for five years and remove anti-guidance provisions.
Merchants will have more freedom to offer discounts, or charge additional fees on cards with higher interchange fees.
Many customers already warn at checkout that they will pay more with cards rather than cash.
The fee rollback and cap alone are worth $29.79 billion, according to court papers, and Visa estimated that small businesses make up more than 90% of settled merchants.
Visa and Mastercard denied any wrongdoing in agreeing to the settlement.
In separate statements, Visa's North America president, Kim Lawrence, said the agreement addressed “real vulnerabilities” identified by small businesses, while MasterCard's general counsel, Rob Baird, said it gave businesses “great certainty.”
With mail wires
