Credit card suit takes swipe at perks programs

Fee frenzy. Retailers just notched a big win in a lengthy battle against credit-card network operators. Visa and Mastercard, which toger account for three-fourths of credit-card transactions globally, agreed in a settlement to cap so-called swipe fees that y take when shoppers use ir cards. counsel representing millions of U.S. merchants involved estimates arrangement will save m a collective $30 billion over five years. It could also cause greater shifts in rich economics of paying on plastic.

At present, retailers can sometimes ask customers to pay more when y use a card than when y hand over cash, but y typically can’t vary price according to which specific card is swiped, under terms imposed by two powerful payment networks. In ory, new arrangement will change this. Swipe fees, which in 2023 cost merchants $72 billion, per data provider Nilson Report, have been rising rapidly. Networks negotiate m with merchants, though most of income goes to banks issuing cards. While consumers may not know it, cards with rewards programs that offer perks like airline miles tend to be pricier for merchants to process.

After this settlement, retailers might raise prices for shoppers who use se premium cards, which could erode demand. If a customer goes to buy coffee with a friend and realizes she will be charged more for same latte because she uses her Chase Sapphire Reserve card, for example, she might reconsider her payment method.

Credit cards drive huge profit for banks, so mere threat that merchants could pass higher fees onto lucrative customers could spook m into settling for a lower overall rate. But re is some stickiness: A Bankrate survey of over 2,000 U.S. ults suggests that 67% of those with credit card debt still prioritize rewards.

settlement resolves litigation that has dragged on for nearly two deces, though Morgan Stanley analysts reckon it will cost both networks less than 0.01% of ir 2025 revenue. Meantime, policymakers’ calls for legislation that could more permanently erode what U.S. Senator Dick Durbin calls a “duopoly” are intensifying. For card-swiping customers, fight is just beginning.