Visa and Mastercard Deal Could Make Rewards Cards Harder to Use

Visa and Mastercard have reached a proposed settlement in a lawsuit that has stretched across two decades. The agreement would give merchants more freedom to decide which credit cards they accept and how they handle the cost of processing them. Final approval is still unresolved. A similar attempt failed last year after objections from parts of the retail industry.

Merchants have long argued that the fees tied to premium rewards cards are too high. These fees often land near three percent and sometimes more, and merchants say they have little choice but to absorb them. Under the proposal, a shop could choose to accept basic Visa or Mastercard cards while refusing higher-tier airline miles or cash back cards. Merchants could also pass the fee to the customer at checkout. Some already do this, although state rules differ. New York recently restricted surcharges unless prices are displayed upfront. Massachusetts and Connecticut do not allow surcharges at all.

Visa and Mastercard collected about one hundred eleven billion dollars in swipe fees last year. Smaller merchants and major chains have clashed over settlement terms before and are likely to do so again. The judge in the previous round said the companies could offer more, which leaves the outcome uncertain.

For consumers, the effects could be direct. There may be more checkout surcharges for premium cards. Some stores may stop taking high-reward products. Prices may vary more based on how you pay. Using a rewards card everywhere may become less reliable, and the value of those rewards may slip if acceptance narrows.