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- Retailers recently won the right to negotiate credit card "swipe" fees with Visa and Mastercard.
- Swipe fees fund credit card perks such as cash back, travel benefits, and purchase protection.
- As a result, premium credit cards are more likely than others to be impacted by this legislation.
You might soon pay more for the privilege of paying with a premium credit card like the Chase Sapphire Reserve or The Platinum Card from American Express.
Global payment networks Visa and Mastercard settled a massive antitrust settlement with U.S. retailers Tuesday, March 26, that will cap fees on credit card swipes.
Merchants that accept Visa and Mastercard can expect to save nearly $30 billion over the next three years if the presiding district court approves the agreement. The bulk of that savings will come from changes to interchange or "swipe" fees, the charge retailers pay to process credit card transactions.
Swipe fees currently average between 2% to 4% per transaction, depending on the card. Swipe fee revenue funds credit card rewards such as cash back, travel points or miles, purchase protection, and trip insurance. Cards with premium benefits typically cost merchants more per swipe.
Visa and Mastercard have regulated interchange rates until now. But the settlement allows retailers to negotiate lower transaction rates and pass along those costs to consumers — and charge customers more for using premium credit cards, which cost more for card issuers to run.
Some financial experts believe credit card users will pay more due to the settlement. "It's not a question of if, but when merchants will pass along transaction fees to consumers," said Michael Spelfogel, credit card loyalty expert and founder of Cardless, a company that helps brands develop co-branded credit cards.
But credit expert John Ulzheimer, formerly of FICO and Equifax, disagrees. "Swipe and interchange fees are already being subsidized by cardholders to a great extent," Ulzheimer told Business Insider via email. "This move to reduce the fees actually most benefits consumers who are being charged the fees at checkout, to the extent the retailers pass on the savings."
Premium credit cards: Worth paying a premium per purchase?
As of now, any predictions are just pure speculation, especially until the settlement moves through the court system to resolution.
But we've seen premium credit card annual fees steadily rise over the past few years, and this legislation may further impact loyalty rewards. A $450 annual fee sounded sky-high to most consumers in 2014. But it isn't uncommon for young professionals in 2024 to hold at least one credit card that costs $550 or $695 a year, in exchange for luxury benefits worth thousands of dollars in credits and perks toward airport lounge access, fine dining, free flights and hotel stays, and more.
All of these perks are funded by revenue from interchange fees, and major card issuers like Chase, Capital One, Wells Fargo, and Citi will undoubtedly take note as the situation continues to develop. We may see annual fees rise even higher. Or, issuers may instead drop or diminish card benefits in scope and value, as recently happened in an unrelated update to several popular Delta cards.
If you have a premium card — or two, or three — in your wallet, you're probably safe from cost increases for the time being. And the protection benefits of paying with a top-tier card with travel insurance are worth a few extra dollars down the road.
But be prepared to potentially shift your payment strategy, especially if merchants begin charging variable rates based on different costs for premium credit cards. A no-annual-fee credit card with bonus points on groceries could be a better choice at the supermarket, for example, than swiping an expensive card that only earns one point per dollar on groceries. Or even consider paying cash at local mom-and-pop stores if you want to support small businesses by eliminating these transaction fees altogether.
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