Credit card suit takes swipe at perks programs

Fee frenzy. Retailers just notched a big win in a lengthy battle against credit-card network operators. Visa and Mastercard, which together account for three-fourths of credit-card transactions globally, agreed in a settlement to cap the so-called swipe fees that they take when shoppers use their cards. The counsel representing the millions of U.S. merchants involved estimates the arrangement will save them a collective $30 billion over five years. It could also cause greater shifts in the rich economics of paying on plastic.

At present, retailers can sometimes ask customers to pay more when they use a card than when they hand over cash, but they typically can’t vary the price according to which specific card is swiped, under the terms imposed by the two powerful payment networks. In theory, the new arrangement will change this. Swipe fees, which in 2023 cost merchants $72 billion, per data provider Nilson Report, have been rising rapidly. Networks negotiate them with merchants, though most of the income goes to the banks issuing the cards. While consumers may not know it, cards with rewards programs that offer perks like airline miles tend to be pricier for merchants to process.

After this settlement, retailers might raise prices for shoppers who use these premium cards, which could erode demand. If a customer goes to buy coffee with a friend and realizes she will be charged more for the same latte because she uses her Chase Sapphire Reserve card, for example, she might reconsider her payment method.

Credit cards drive huge profit for banks, so the mere threat that merchants could pass higher fees onto lucrative customers could spook them into settling for a lower overall rate. But there is some stickiness: A Bankrate survey of over 2,000 U.S. adults suggests that 67% of those with credit card debt still prioritize rewards.

The settlement resolves litigation that has dragged on for nearly two decades, though Morgan Stanley analysts reckon it will cost both networks less than 0.01% of their 2025 revenue. Meantime, policymakers’ calls for legislation that could more permanently erode what U.S. Senator Dick Durbin calls a “duopoly” are intensifying. For card-swiping customers, the fight is just beginning.