Visa and Mastercard ended a long-awaited battle with merchants in a historic $30 billion settlement regarding swipe fees. Here’s what it means to cardholders.
Reduced charges until 2030
The settlement reduces interchange rates or swipe fees, ensuring that swipe fees remain the same until at least 2030, if not longer. Additionally, the settlement reduces credit interchange rates for U.S. retailers, which are mainly made of small businesses, Visa’s press release confirmed.
Premium users might not be so lucky
While the settlement is primarily positive or neutral news for Visa and Mastercard users, some premium users could be adversely affected. Potentially, these include Visa Infinite and Mastercard World Elite cardholders. Bloomberg News analyzed the situation.
What could it mean while you’re paying
Bloomberg reported that the settlement allows retailers to charge extra for some cards, and the outlet used an example of a $100 transaction paid with a Visa Infinite card. While the regular Visa fee is $2.10, for a Visa Infinite user, it could be $2.60.
Perks of premium cards
The card in question, Visa Infinite, has an annual fee of $525, but it offers many perks, including 80,000 bonus miles after spending $5,000 on purchases in the first three months, discounts for travelers, gym memberships, and more.
Earning 3X points
Another premium card, The Chase Sapphire Reserve, comes with a $550 annual fee. It offers up to 3X points on travel and dining, a $300 annual travel credit, and more, including wellness rewards.
Merchants will feel relief
The Nilson Report confirmed that the settlement would bring merchants some relief after paying a record-high $100 billion in fees to Visa and Mastercard in 2023 alone. That was $7.5 billion more than in 2022.
The settlement gives more flexibility
The settlement’s updated anti-steering provisions will allow merchants more flexibility at the point of sale. This includes the opportunity to steer shoppers to preferred payment methods.
No wrongdoing
Visa and Mastercard said there was no wrongdoing on their part. Mastercard’s General Counsel, Rob Baird, commented that the settlement gives businesses “substantial certainty.” Visa’s North American president, Kim Lawrence, claimed the agreement addressed valid pain points.
The Credit Card Competition Act
The settlement comes days before the April 9 hearing regarding the proposed Credit Card Competition Act. Senate Judiciary Committee Chairman Richard Durbin, a Democrat from Illinois, will hold the hearing about the issue of the Visa-Mastercard duopoly controlling over 80 percent of the U.S. credit card market.
Visa and Mastercard will not attend
The Credit Card Competition Act of 2023 pledges to enhance credit card competition and give options to reduce excessive credit card fees. Mastercard and Visa representatives said they will not attend, Reuters confirmed.
The act could make a more significant impact
Ted Rossman, an analyst from Bankrate, said the settlement does not change much for the buyers. However, if the proposed act became a bill, it could really change the credit card market.
Bipartisan effort
The bill, co-sponsored by Republican Senator Roger Marshall, aims to save merchants and credit card users $15 billion annually while businesses pay over $100 billion in swipe fees annually. Two senators, Democrat Jack Reed and Republican Josh Hawley, joined the efforts, MPC confirmed.
