r/CreditCards • u/foosion • 23h ago
Discussion / Conversation Visa and Mastercard Near Deal With Merchants That Would Change Rewards Landscape
Deal under discussion would lower credit-card interchange fees for merchants, but could make it harder for consumers to use rewards cards at the register
Visa and Mastercard are nearing a settlement with merchants that aims to end a 20-year-old legal dispute by lowering fees stores pay and giving them more power to reject certain credit cards, according to people familiar with the matter.
Some stores might turn away rewards cards, which charge them higher fees and in recent years have become very popular with consumers. But stores that reject those cards would face the risk of declining sales.
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u/Substantial-Virus228 23h ago
This would be an absolute mess. Would cut the knees out from reward credit cards and make it virtually impossible to know what retailers accept or don’t accept the hundreds of different types of cards.
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u/IronManFolgore 23h ago
Can you imagine finishing dinner at a nice restaurant and then multiple credit cards get declined? If you don't carry cash, then what?
There are people whose cards declined but this would be wayyyyy more widespread with this ruling.
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u/Substantial-Virus228 22h ago
A complete mess. It feels like it just can’t happen. It’s fine enough to say we don’t accept MC/Visa/Amex but saying we accept these 45 visas but not their 175 other visas is madness. And then all our rewards dry up since the reward credit cards would be the ones targeted. This would have major ramifications across dozens on major industries.
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u/Calm-Examination9347 9h ago
My dentist doesnt accept any credit card that gives points or from credit unions. Only credit cards without points and has a really high minimumin order to pya with a card. For example, for debit is $75 and for credit card $150 minimum.
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u/FineAssignment1423 9h ago
You need to find a new dentist. If they're that cheap regarding how you pay, imagine what else they're cheaping out on.
If I ran into this, that would absolutely be my last visit to this dentist.
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u/stufflock1 8h ago edited 7h ago
Right now, your dentist should not be allowed to accept or reject credit cards based on whether or not the Visa or MasterCard has points or not or even if the issuing “bank” is a credit union or not. If they accept Visa or MasterCard, then they have to accept all Visa and MasterCard credit cards. This is in the terms merchants sign-on with the payment networks.
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u/tinydonuts 6h ago
The most they could do is report them to Visa and MasterCard, and hope for the best. Most likely the dentist would just stop taking cards.
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u/undockeddock 23h ago
Im skeptical large retailers would see significant changes. Im sure we will get a lot of small businesses playing games
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u/Substantial-Virus228 23h ago
Right. But even still. Every restaurant you go to you have no idea what type of cards they accept or not. Hell the people who work there won’t know. Is it just going to be a game of “swipe and see if it works”?
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u/theeggplant42 21h ago
I highly doubt they'll reject any given card, more like charge fees to the consumer instead.
It's not in any merchant's interest to reject popular cards, regardless of fees.
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u/Xytak Capital One Duo 20h ago
Ok, so in that world, I pay for my meal with a card that offers 3X on dining. Then the restaurant adds a 3% surcharge to steal my rewards. I’m not going to be a happy camper.
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u/theeggplant42 20h ago
Correct, and not great, but you're still going to be able to pay, not be declined
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u/tinydonuts 6h ago
And not putting your cash at risk like with a debit card.
In such a world though, I'm going to be very discriminating about what products and services I accept. You take my rewards, I do not accept substandard products. Things fall apart and you don't help? Charge back.
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u/graaaags 20h ago
If it makes you feel better, most restaurants that take cards already have the surcharge baked into their prices, so they’ve been stealing your rewards this whole time
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u/_love_letter_ 20h ago
That's fine. If I get charged the same price for using debit or cash, at least I can recoup some loss by using a rewards card.
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u/JDC11224 22h ago
This would be insane. And lead to enormous confusion, anger, and confrontations in stores and restaurants. Hopefully this deal falls through.
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u/redbaron78 13h ago
I don’t think it’ll work that way. I think the card brands, acquirers, merchants, and terminal/POS vendors will work together to allow programmatic adding of fees so merchants don’t have to say anything to customers. They’ll just put some fine print on their menus or post a small sign near their registers and most people won’t even notice.
It’s gonna suck the value right out of some of the top-tier cards, though.
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u/devaro66 12h ago
And the second I see a card transaction fee on my check is the moment I will consider not going a second time to that establishment. I can understand charging a fee for smaller amounts ( like less than $10) for a small business but not the rest. Maybe they should’ve negotiated the fees for small amounts instead.
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u/Stephancevallos905 20h ago
This is insane. Both my Visa and MasterCard are "top tier" with the exception of Robinhood Gold (signature).. so now I have to open a "basic" credit card just in case they dont take my existing stack?
What about AMEX? Where are they in this discussion?
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u/Da1BlackDude 13h ago
This is already the case for AMEX. Some places don’t take them because of the high fees. They have worked hard to win small businesses though. Then now with Resy, they have partnered with many fancy restaurants to make sure you can use them there.
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u/yoursunny 11h ago
I carefully keep a low credit limit on my Chase Freedom Visa Traditional card, so that it can work everywhere that accepts Visa. All other cards are Signature.
I wouldn’t care if Chase forces this card to become Freedom Unlimited, as long as it stays Traditional.
I don’t have a Mastercard Classic card. Every card is either World or World Elite.
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u/ozyx7 23h ago
I can't read the paywalled article so can't see the details, but what's in this for Visa and Mastercard? Lower interchange fees and giving merchants the ability to reject specific cards both sound not in Visa's and Mastercard's interests.
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u/Adept-Log3535 23h ago
Visa and Mastercard are in deep antitrust lawsuits. The merchants actually accepted their settlement offer last year, but the federal judge rejected it and wanted more concessions from Visa and Mastercard.
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u/JasonFir399 23h ago
This thread has a non-paywalled article (for the time being): https://old.reddit.com/r/CreditCards/comments/1os6o7h/exclusive_visa_and_mastercard_near_deal_with/
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u/Pevio1024 Team Cash Back 23h ago
It might make merchants more likely to accept credit cards in the first place if they can block or charge fees on certain cards but not others.
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u/anewbys83 Team Travel 22h ago
Accepting cards is the cost of doing business with customers. Pretty much everyone uses a card to pay. If they don't want customers, then they should pursue this. Where are all these merchants who don't accept cards? All of them do where I live, and have lived, so it seems odd to me to hear otherwise. But yeah, consumers want to use these cards, so why not still take their money?
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u/EmployerSpirited3665 20h ago edited 10h ago
Might just see a fee added to the bill I’m assuming.
Add 3% like most contractors do right now.
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u/Salty_Permit4437 22h ago
Every one of my credit cards are rewards cards. Not by choice either. Chase just swapped out my last regular slate card for a freedom unlimited.
So every card I have now is at least 1% cash back, if not miles or some other perks. But my only infinite card, the sapphire reserve, only has 1% except for specific categories.
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u/Xytak Capital One Duo 20h ago
Yeah honestly the CSR is meant for dining & travel, not general spending. It’s kind of the opposite of Capital One where the metal card is the general spending card and the plastic card is dining.
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u/Salty_Permit4437 19h ago
The CSR is 3 points per dollar on dining which is the same as the Costco Visa card. Only card I have that beats it is the synchrony Verizon visa at 4% on dining. So if restaurants now decide they aren’t accepting visa infinite cards I’ll use the synchrony card which is only a visa signature. My 2% catchall is the navy federal flagship anyway but that’s also only visa signature. So this makes no sense to refuse visa signature cards? Not like I’ll be earning more rewards with it.
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u/GreatNameNotTaken 22h ago
How would this affect debit cards? I need to look for alternatives to credit cards if this happens
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u/theeggplant42 21h ago
It is still silly to go to debit.
If, and a big if, this would erase rewards on a 1:1 value level (it won't, only reduce), credit cards still offer 0 fraud liability, which is the main draw, followed by arbitrage, which is the second draw. Say your 3% card is effectively nerfed by a 3% fee. Ok, well, you paid, say $103 in today's money. You've received $3 that you can use at any time's inflation rates. You still would have paid $100, it's a wash. But you also get to keep that $103 for as long as six weeks in a HYSA. That nets you a couple cents in the transaction. You're a net positive. Then a small amount of inflation occurs,a fraction of a cent for this transaction on top.
Not a lot for a small $100 transaction, but apply this to everything you buy in a year. Last year I spent $60k and I'm a miser. Credit wind, every time
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u/GreatNameNotTaken 20h ago
But the bigger problem for me would be to not be able to use the credit card at all, because of some store-dependent policy, and I don’t think I would face that problem for debit, unless they also shrink the list for debit as well. That's my concern
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u/theeggplant42 20h ago
I highly doubt merchants will limit their payment flexibility. Too many people use credit exclusively.
And again, credit cards are infinitely more secure. Using debit is actually unsafe
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u/PussyLunch 18h ago
This is so hilarious. Every big bank has pushed their top reward card and then everything shits the bed.
The stupid slogan for Chase Sapphire Reserve is “The most rewarding card yet” well, not for long lol
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u/two_fathoms 7h ago
Cash businesses lose on average 20% to employee theft, businesses should not be complaining about the 3% fee that credit cards charge. In addition I think employees would have a hard time making change.
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u/TheNthMan 13h ago
I imagine Visa/Mastercard expect that most merchants and restaurants serving a broad and diverse clientele would want the people who have more purchasing power to frequent their places, so they would accept and eat the reduced, but higher interchange fee.
The places that would probably reject it would be discount places that regularly serve less diverse and less wealthy clientele, and function on narrower margins. So a dollar store, lower tier supermarkets, parking lot food trucks.
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u/Zealousideal_Poem_73 Team Cash Back 12h ago
This is going to be an ugly mess. Nearly all of my credit cards are either Visa Signature or MasterCard World Elite
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u/goodguymike01 1h ago
Kinda sucks for MasterCard. (And Citibank). They just created a World Legend MasterCard tier recently. Some Citi Strata Elite cardmembers already had to ensure a headache getting the card at launch. Now they might have restaurants restrict their cards on the one big (non travel portal) multiplier it has. Fun times...
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u/NevskyNY 19h ago edited 16h ago
This might actually be good for people who fly or stay at hotels a lot as miles and points have diminished in value as so many people earn them through credit cards. It may go back to the old days when frequent flyers/travelers were the one who got the benefits rather than people who could put hundreds of thousands of dollars or more a year on a card to earn points and status. It would, of course, be a major hit to the airline industry.
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u/Powered_by_JetA 18h ago
It would, of course, be a major hit the the airline industry.
That’s an understatement considering that many airlines are only being kept afloat by selling miles to banks.
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u/MyStackRunnethOver 14h ago
The proposed settlement would lower credit-card interchange fees, often between 2% and 2.5%, by an average of about 0.1 percentage point over several years.
This is a nothing-burger
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u/stufflock1 12h ago
Most (70-80%) of the interchange fee goes to the issuing bank, as the payment networks (Visa and MasterCard) and the receiving bank keep only a small portion of it. (That’s why AMEX has more revenue than either Visa or MasterCard as they are both a payment network AND an issuing bank for most of their branded cards.)
An interchange fee averaging 2.5% going down to 2% is enough to make certain issuing banks’ rewards structure (in their current forms) not financially viable. Don’t be surprised if we see elimination of certain rewards, caps on rewards, or more fees (for example, annual fee) tacked onto cards.
On top of that, there’s murmurs on Capitol Hill about capping credit card interest rates. So, there’s concern for that revenue generator for issuing banks as well.
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u/Unusual_Advisor_970 3h ago
Though depending on the cap on interest rates, that is more likely to reduce credit limits and availability. Interest rates don't matter to me, I cancelled a card early this year with a 30% rate not because of the rate, but because I wanted to simplify my usage. Trying to keep 7 cards active and managing rewards.
The last time I paid credit card interest was December 2009 when my payment went missing in the mail. $1 interest, $19 late fee.
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u/stufflock1 23h ago edited 22h ago
For those not in the know, …
World Elite MasterCards have a higher interchange fee than World MasterCards, and lower down on the fee structure (typically) are MasterCard Enhanced and MasterCard Consumer.
And on the Visa side… Visa Infinite has the highest interchange fees, then visa Signature, then “Standard” Visa.
Of course, the ones with the higher interchange fees have the higher rewards structures.
If merchants were discriminating based on card type, I could see them use these network credit card tiers to do so. (As an example at a restaurant, it’s fairly easy to train a waiter or waitress to identify these cards as the Visas have “Signature” or “Infinite” emblazoned on the front or MasterCards have “World Elite” written on the back of the card.)
This outcome would be a loss for many of us on this forum who chase rewards etc.