FINANCIALS, PAYMENTS, PROPERTY & INSURANCE

The Swipe Fee Shake-Up: How the Visa–Mastercard Deal Could Dull Your Rewards

Visa and Mastercard are close to a settlement that would slightly reduce interchange fees and allow merchants to reject high-fee rewards cards, potentially reshaping how credit cards are accepted and used. The move could pressure premium rewards programs, leading to leaner perks and higher costs for cardholders, while giving merchants more flexibility and pricing power at checkout.

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GLO

Visa and Mastercard are reportedly nearing a landmark settlement that could reshape the credit card landscape in the United States. The deal would slightly reduce interchange (“swipe”) fees and, for the first time, allow merchants to reject certain high-fee rewards cards while still accepting cheaper ones.

The potential impact? Pressure on premium rewards programs, more merchant control at checkout, and a gradual rebalancing of who really pays for rewards — consumers or retailers.

After nearly two decades of litigation between merchants and the two payment giants, Visa and Mastercard appear close to a resolution. The agreement would lower average credit card interchange fees by about 0.1 percentage point over several years, from roughly 2–2.5% to around 1.9–2.4%.

Equally significant, it would loosen the long-standing “honor-all-cards” rule, which currently forces merchants that accept one Visa or Mastercard product to accept all of them. Under the new framework, stores could opt out of accepting the most expensive card types — often those with the most generous rewards.

The deal would still need court approval before taking effect.

Why This Matters

For decades, every Visa or Mastercard product — whether a no-frills card or a premium travel rewards card — has been treated equally at the point of sale. That may soon change.

The proposed settlement introduces a tiered acceptance model, dividing cards into categories such as standard credit, rewards, and commercial. This could allow merchants to pick and choose which cards to take, especially as payment processing costs rise.

It’s a profound shift: the convenience of “every card works everywhere” might give way to a more fragmented checkout experience.

How Merchant Choice Could Affect Shoppers

Selective acceptance could become the norm.
Large retailers might start refusing ultra-premium rewards cards that carry higher fees. Smaller businesses could follow suit, especially if payment processors make it easy to filter card types. Shoppers might begin seeing more “We don’t accept [card type]” notices at gas stations, grocery stores, or restaurants.

Expect more surcharging and steering.
With greater flexibility, merchants could encourage customers to use cheaper payment methods, like debit or basic credit, or impose small surcharges on high-fee cards. This kind of “steering” has long been common in countries where interchange is tightly regulated.

Prices may shift subtly.
Instead of baking card fees into prices for everyone, some stores could introduce differential pricing — one price for cash or debit, another for credit. That transparency might save some shoppers money, but it could also complicate checkout.

The Impact on Rewards Programs

1. Pressure on Premium Rewards

Rewards programs are largely funded by interchange fees. If merchants reject the highest-fee cards, issuers lose part of the revenue stream that subsidizes generous perks. Over time, that could mean leaner points earnings, trimmed travel benefits, or higher annual fees.

Other markets offer a preview: when interchange fees were capped in the EU, the average value of rewards declined. U.S. issuers could follow a similar pattern.

2. A New Hierarchy of Cards

Card acceptance could soon resemble a tiered system:

• Basic credit: Lower fees, modest rewards — accepted almost everywhere.

• Mid-tier rewards: Still widely accepted, but occasionally turned away.

• Premium travel and luxury cards: Rich perks, but increasingly refused at cost-sensitive merchants.

3. Co-brand and Travel Card Fallout

Airline and hotel co-brands rely heavily on interchange revenue to fund their loyalty perks — from point transfers to lounge access. A drop in revenue or acceptance could lead to devaluations, benefit reductions, or higher fees for these products.

4. How Issuers Might React

Credit card issuers are unlikely to sit still. Expect them to:

• Lower reward rates on everyday purchases.

• Introduce new “program fees” or raise annual fees.

• Shift focus toward debit-linked rewards, installment products, or merchant-funded offers.

• Market “universal acceptance” as a selling point for their premium products.

Will Consumers Win?

It depends. Some shoppers could benefit from slightly lower prices as merchants pass on savings from reduced fees. Others — particularly heavy rewards users — might lose out as perks shrink or fees rise.

Premium cardholders could also face acceptance challenges, especially in everyday spending categories. Meanwhile, casual users of no-fee or basic rewards cards might see little difference — and could even benefit from merchants passing along savings.

Smart Moves for Cardholders

• Carry a backup card: Keep at least one widely accepted, low-fee credit or debit card for merchants that decline premium options.

• Watch for surcharges: If a retailer adds a credit fee, weigh whether your rewards offset it.

• Diversify your rewards strategy: Focus on flexible points programs that can adapt to future changes.

• Review annual-fee cards: If your premium card’s perks shrink or acceptance drops, consider downgrading or switching.

What Happens Next

The settlement still needs judicial approval, which could take months or longer. Implementation would likely be gradual, as Visa and Mastercard revise network rules and issuers adjust card pricing structures.

Investors, merchants, and consumers will be watching closely as the agreement’s details emerge — and as the payments ecosystem recalibrates to a new balance of power between issuers, merchants, and cardholders.

Global Loyalty Organization’s Perspective

The Global Loyalty Organization (GLO) sees the potential settlement as a defining moment for the loyalty industry. In a recent statement, GLO noted that while interchange reforms can lead to short-term reductions in rewards value, they also create opportunities for innovation in loyalty design.

According to GLO, the future of rewards may shift “from issuer-funded to ecosystem-funded,” with merchants and brands playing a larger role in rewarding customer behavior directly. The organization predicts that partnerships, data-driven offers, and flexible redemption experiences will become central to maintaining customer engagement in a post-settlement environment.Rewards cards aren’t going away — but the golden era of unlimited perks may be fading. As the payments landscape evolves, both consumers and issuers will need to adapt to a more transparent, and perhaps more selective, world of plastic.

Source: GLO