Summary of the Visa & Mastercard Settlement & Potential Impacts
this article details a proposed settlement in a nearly 20-year legal battle between Visa, Mastercard, and a class-action group of merchants over interchange fees (the costs merchants pay to except card payments). Here’s a breakdown of the key points:
The Core Issue: Interchange Fees & the “Honor All Cards” Rule
* Interchange Fees: Merchants have long argued that Visa and Mastercard’s interchange fees are too high.
* “Honor All Cards” Rule: Currently, if a merchant accepts Visa or Mastercard, they must accept all versions of those cards, even premium cards with higher fees (like those associated with Chase Sapphire Reserve or Citi Strata Elite).This is the main point of contention.
What the Proposed Settlement Does:
* Allows Merchants to Discriminate: The settlement would allow merchants to choose which tiers of Visa and Mastercard they accept. They could opt-out of accepting higher-fee, rewards-heavy cards.
* Potential for Card Declines: This means customers with premium cards might be declined at the point of sale if a merchant chooses not to accept their card type.
* Surcharges Possible: Merchants could also be allowed to surcharge customers for using higher-fee rewards cards, passing the cost directly to the consumer.
* Temporary Fee Reduction: Merchants would receive a temporary reduction in swipe fees: 10 basis points for five years, and standard transactions processed at 1.25% for eight years.
Why This Matters to Consumers:
* Rewards Card Usage: The value of rewards cards could be diminished if merchants decline them or add surcharges.
* Potential Inconvenience: Consumers might need to use different payment methods if their preferred rewards card isn’t accepted.
Reactions & Next Steps:
* Merchant Opposition: Major retail lobby groups (like the National Retail Federation) are opposing the settlement, arguing the fee reductions are insufficient and the “honor all cards” change is ineffective. They want Congress to regulate interchange fees.
* Visa & Mastercard’s Position: The payment networks believe this is the best resolution to end the long-running litigation.
* Uncertain Future: The settlement still needs court approval and faces opposition, so it’s not guaranteed to be finalized.
Important Note: this settlement does not affect American Express or debit cards.
