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Visa and Mastercard agreed to a settlement with U.S. merchants earlier this week, promising to lower the fees stores have to pay for processing credit card payments — at least in the short term.

The settlement opens doors for retailers to charge fees on cards with higher swipe fees, which could make using a premium card with a hefty rewards program more expensive. Some have speculated that the changes could affect credit card rewards, or perhaps allow merchants to pass on their savings to customers.

But other experts are skeptical that this could lead to significant changes for credit card users.

The settlement does not appear to have “any impact on the credit card holder,” said Michael Kinsman, professor emeritus of finance and accounting at Pepperdine University in California, who operates a CPA firm in Laguna Beach.

What did the settlement say?

Visa and Mastercard denied wrongdoing but agreed to some changes at short notice as part of the settlement. Amongst them:

  • The companies will reduce interchange fees – the fee merchants must pay to process a credit card payment, also known as ‘swipe fees’ – by at least 4 basis points (0.04 percentage points) for three years.
  • The swipe interest rate must be at least 7 basis points below the current average over the next five years.
  • Merchants will be able to more easily steer customers to other payment methods and impose fees on premium credit cards with higher swipe fees.

The settlement still needs to be approved by the court and any changes would not take effect until late 2024 or 2025, according to a statement from Mastercard.

What does this mean for credit card holders?

Patrick Payne, associate professor of personal and family financial planning at the University of Arizona in Tucson, doesn’t expect “dramatic changes” from the settlement but believes it could lead to more expensive premium cards.

The tickets are already pricey; For example, Chase Sapphire Reserve has a $550 annual fee in exchange for perks like airport lounge membership access and a $300 annual travel credit. The annual fee for the Platinum Card from American Express is almost $700.

Premium cards are also more expensive for merchants. The National Retail Federation says swipe fees average about 2% per transaction, but can be as high as 4% for premium rewards cards.

If this settlement is approved, merchants would have the ability to charge customers more for using premium Visa and Mastercard credit cards.

But it’s not clear that stores would do that want to to charge these customers more, said Lulu Wang, assistant professor of finance at the Kellogg School of Management in Evanston, Illinois. Charging certain customers – especially high-paying customers – to pay an additional surcharge threatens to deteriorate relationships and harm business.

“People talk about some of the changes it could bring to sellers, but those changes seem like such a huge pain … to implement,” he said.

“If they tried to do that, customer relations would just be terrible. They had eggs all over their faces,” Kinsman added.

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Will traders pass on their savings to consumers?

Retailers that accept Visa and Mastercard are expected to save at least $29.79 billion in the five years following the settlement, according to a statement from one of the law firms representing U.S. merchants in the lawsuit.

In theory, merchants could pass some of these savings on to customers by lowering prices. According to Payne of the University of Arizona, this could especially occur in smaller companies.

“They might offer more competitive prices to draw people away from the big retailers,” he said.

But other experts say consumers shouldn’t get their hopes up.

“Most people won’t know about the settlement anyway,” said Kinsman, professor emeritus at Pepperdine University. “Why should I, as a trader, refund those costs to my customers?”

What will Visa and Mastercard do?

Beverly Harzog, author of “The Debt Escape Plan: How to Free Yourself from Credit Card Balances, Boost Your Credit Score, and Live Debt-Free,” said she doesn’t expect many changes among credit card issuers after the settlement. because the changes are not a “permanent solution”. The three- and five-year time frames give the companies little time to make significant changes, she said.

“It’s like trying to turn a giant cruise ship,” she said. “It takes a lot of time, and sometimes by the time they’re ready to make that pivot, the market has changed again.”

Her warning? If a credit card company decides to make a change after the settlement – ​​whether it’s increasing an annual fee or reducing certain benefits or perks – others will likely follow suit.

“I’d be looking forward to that first domino,” Harzog said. “And right now I don’t expect that, just because this (settlement) hasn’t been finalized yet. Even if that is the case, it is a temporary solution and in a few years everything will be back to normal.”

Visa plans to keep its “rewards and access to credit” if the settlement is approved, according to a statement quoting Kim Lawrence, the company’s president of North America, released earlier this week. Spokespeople for Visa and Mastercard did not immediately respond to requests for comment sent outside normal business hours on Friday.

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