Premium credit card users and small merchants could soon feel the effect of a decades-long battle over swipe fees.
With the new move, merchants could more easily add surcharges selectively who are less price-sensitive, John Cabell, managing director of payments intelligence at J.D. Power, told Fortune. Premium cardholders, with annual fees above $500, spend an average of $2,736 a month, nearly three times as much as those with cheaper cards. Only 22% of those cardholders report they select alternate payment methods when faced with a surcharge, according to J.D. Power data. That’s compared to 33% of holders of no-fee cards.
But while some merchants might be tempted to trim costs by limiting which cards they accept, doing so could alienate big spenders and disrupt the lucrative rewards ecosystem that fuels consumer spending.
“Over time, if premium cards become even more expensive to use at the point of sale, this type of change might reign in the upward spiral of rewards and benefits that consumers have grown to appreciate,” Cabell added. “Even relatively modest cards might see a reduction in offerings as well if surcharges become generally more prevalent with mid-tier and premium card groupings.”
But others argue merchants will think twice before turning away big spenders. Brian Kelly, founder of The Points Guy, told Fortune he didn’t expect the deal’s potential results to be dramatic because if businesses refuse top-tier rewards cards, they’d likely lose more revenue than they save on interchange fees.
“If this settlement proceeds, merchants may continue adding small fees for credit card transactions, which they’re already allowed to do today,” Kelly added.
In a statement, Mastercard said they believe the settlement is the best solution for all parties.
“Smaller merchants will gain in this settlement – more acceptance choices, reduced costs and simplified rules,” the company said in a statement. Even more, it allows us to focus our energies on continuing to give consumers, small businesses and larger merchants what they expect from Mastercard – a better payments experience, strong value and peace of mind.”
Visa told Fortune the deal would “provide meaningful relief, more flexibility and options to control how they accept payments from their customers.”
Many trade groups criticized the settlement, arguing it doesn’t go far enough to protect merchants.
The National Grocers Association added that the proposed settlement does not address the “anticompetitive price-setting in the credit card industry.”
