MASTERNC

Looks like it is less of a break financially to merchants (7 bps interchange cut eventually, with a 5 year cap on fees) but it allows surcharging and also surcharging by card type and allows merchants to pick which cards they will accept. Might severely curtail the points/miles game as playing becomes more expensive.

Visa, Mastercard Reach $30 Billion Swipe-Fee Deal With Merchants - Bloomberg

Visa Agrees to Landmark Settlement with U.S. Merchants Reducing Rates and Guaranteeing No Increases for at Least Five Years | Visa

notquiteaff

“Retailers will now be able to charge consumers for using a Visa or a Mastercard card and they’ll be able to adjust their prices based on the cost of accepting different credit cards. That could mean, for instance, that a consumer with a Chase Sapphire Reserve card, which carries the Visa Infinite branding and therefore comes with a higher interchange fee, would be charged more at checkout than a customer using a Chase Freedom Unlimited card.”

(Bloomberg article)

How is that going to work in practice? Do merchant terminals have a way of determining the type of card and display the card-specific fee for customer approval? Will merchants maintain a photo book of “expensive” cards and check every card against the list? How will that work with mobile payments - does the phone pass the card type to the terminal? Do I need to show the merchant the picture? Can I get a discount if I use a prepaid debit card (of course, paid for with a credit card)?

MASTERNC

You'd think, in theory, the system would already be able to determine the fee based on the BIN and know the fee that card would be assessed. Agree this is going to be a mess if merchants actually start doing this.

rajuabju

1) Its going to be a mess at the point of sales terminals if this different pricing is implemented at all how the various online articles discuss.

2) Its going to have negative impacts on rewards programs. Probably not as bad as some, including myself, had feared... but with these caps now, various programs that are deemed "too generous" will need to be adjusted to remain profitable with the banks and CC companies involved.

Will definitely be interesting to see what lies ahead. Of course, Congress is still working through legislation that if passed, will be even more detrimental than this settlement. CC rewards could easily go away (or, more likely, severely curtailed to a low & fixed redemption value) like what happened with Debit Card rewards.

SpaethCo

I would assume this could work just like the dynamic currency conversion screens or tip screens that are already implemented on the terminals. After swiping/dipping/tapping it makes the initial network lookup, then before the transaction processes it can present a screen that says "Accept charge of $xxx (+ 1% or whatever)" or "change payment method."

notquiteaff

The “change payment method” button will see heavy use then

I guess I will then, at every merchant that implements anything like this, cycle through all my cards in the order of my preference. E.g., dining charge - first I give them my CSR, comes back with a 5% fee, no thanks. Let’s try my Citi Premier. 3% fee… no thanks, let’s try my CFU - 0%, okay, let’s use that one. And in a sit down restaurant, does that mean the waiter will run back and forth with the cards and the check if they don’t have a terminal they can bring to the table?

Also Amex doesn’t seem to be covered by this.

I have a feeling they haven’t really thought this through.

frappant

Or just boycott and cancel any transaction that tries to impose a surcharge.

In other countries they impose like 1-3% surcharge on all credit cards. That's blanket so you can't find too many places which doesn't have CC surcharges.

But in the US, tell merchants to cancel any transaction which has a CC surcharge.

Consumers should have some market power.

But then what happens on e-commerce sites, where increasingly more and more of all retail purchases are migrating to?

tmiw

I'm thinking there'll be some general verbiage on menus or something stating that you agree to be surcharged up to how much it costs the restaurant to run your card and that the only way to opt-out is to pay cash or with a debit card. And since you agreed to the surcharge by giving them a credit card in the first place, they're not going to agree to void your transaction and run a cheaper card.

Given that the plaintiffs' attorneys claim that 96% of Visa/MC transactions can be surcharged with this settlement, this might become difficult pretty quickly (depending on how the final rules are written).

If most in-person transactions eventually start getting surcharged, a fair number of online transactions probably will too.

notquiteaff

How can an unknown surcharge possibly be legal?

What if I decline to sign the credit card slip (hurrah for outdated technology) when it shows an amount greater than the amount originally on the bill?

I think more likely the merchants are not going to bother with different surcharges for different cards. They will just apply the max to all cards and collect the profit.

For in person transactions cash is the obvious alternative payment method. Would you expect debit cards to be the surcharge-free online payment method?

tmiw

If they specify a maximum that it could be, I would think that charging anything less than that would be fair game (local laws of course vary). Especially if it's made clear on the receipt that it was X% more because you used a Visa Infinite or something.

In theory signature isn't required by the networks anymore, so I don't think it'd matter from a chargeback perspective. (Of course, there are still a lot of places that ask even to this day for various reasons.)

Again, this will depend on how the final rules are structured. Though it wouldn't surprise me if many still bend the rules a bit (or a lot), i.e. by surcharging debit cards too or simply charging the same 3% or so regardless.

SPN Lifer

The National Public Radio version of the story.

https://www.npr.org/2024/03/27/12411...-with-merchant

Quote:
According to the settlement announced Tuesday, Visa and Mastercard will cap the credit interchange fees until 2030, and the companies must negotiate the fees with merchant-buying groups.

The law firm that announced the settlement put the value of the savings in swipe fees at close to $30 billion.

Id.

EmailKid

A billion here, a billion there, but 30 billion, now you are talking serious money

notquiteaff

I'll make it my new hobby to file complaints for every debit card transaction that is surcharged against the rules.

phltraveler

I don't see much at all changing.

EDIT: The Visa/MC settlement terms, if you're inclined to read several dozen pages of the finer details.

The four basis points minimum reduction for three years and keeping interchange at least 7 basis points below where we are now for five years... this is relative peanuts. Taking an example of services interchange on Visa Signature non-preferred:

Status quo: 1.85% + 10 cents
Year 1, settlement: 1.81% + 10 cents
Year 2: 1.77% + 10 cents
Year 3: 1.74% + 10 cents
Year 4: 1.78% + 10 cents (still 7 basis points below the settlement amount)
Year 5: 1.78% + 10 cents
Beyond that: could be 1.85% or higher again

EDIT 2: Per my next post, per reading the actual proposed settlement (instead of articles summarizing it), it's not 4 basis points minimum reduction per year for three year, it's three basis points total on the posted interchange for a period of three years, as a subset for reducing average interchange including fees and other assessments by 7 basis points minimum on average by network for five years.

On product level surcharging: This has been allowed by Mastercard since at least 2019, and Visa at least since 2022. It's an absolute nightmare to implement. How is your point of sale going to determine if someone is Visa Infinite Qualified (expected to spend $50K-$250K on the card) or non-qualified Visa Infinite? Same with Visa Signature Preferred (similar thresholds) vs. non- Preferred Visa signature. All of this forgets standard rewards and "all other". And are you going to post an Excel table printed on your 8.5x11" piece of paper with a chart by Visa and Mastercard product type and expect the person coming to your counter to know if their card is Mastercard World Elite or not?

Issuers do product changes without changing the account numbers to new BINs, and sometimes upgrade cardholders within a BIN (my Citi Double Cash was originally an AAviator Mastercard before PC, and was originally a regular mastercard before Citi changed it to a world elite.

In short - unless there's some genius technical solution that I'm not aware of like the issuer passing their interchange classification during card processing (which I have never, ever seen in practice, but who knows), product level surcharging is impossible even if the merchant is manually checking what's printed on the card.

(All of this ignores sometimes allowed stylistic changes - the Apple Card is a World Elite mastercard, but MC permitted Apple/GS a cleaner design that doesn't say that on the physical card or the design in Apple Pay.)

Amex isn't covered by this settlement, and if you surcharge as a merchant who accepts Visa, Mastercard, or both Visa/MC, and you also accept Amex - it is absolutely impossible to surcharge all cards without breaking somebody's network rules.

Visa and Mastercard surcharge rules hold that you can't surcharge debit or prepaid products, even if you run them in credit mode without PIN and more expensive swipe fees.

Amex on the other hand has a most favored nation clause - if you surcharge Amex products, "all other payment methods" in terms of cards must be surcharged - including debit and prepaid.

So let's walk through our scenario surcharges:

1. You don't surcharge at all... you're not surcharging.
2. You surcharge all cards including debit. Amex is cool with this, but you're breaking Visa and Mastercard network rules. In 2023 Visa started threatening acquirers to warn merchants that they will be giving out hefty fines for non-compliance and doing secret shopping.
3. You surcharge credit only, but spare debit. Visa/Mastercard are fine with this, but you're breaking Amex's network rules.
4. You drop Amex acceptance. You can surcharge credit on Visa/MC/Discover and be compliant, but you lose access to Amex cardholders.
5. You surcharge Visa/MC, but spare all Amex products. That just creates incentive for your cardholders to use Amex with higher swipe fees.
6. You drop Visa/MC to be able to surcharge all Amex and Discover cards. Congrats, you've lost access to the majority of the US credit card market.

See above on Amex and Visa/MC that have conflicting rules that create a catch-22 for surcharging if you accept Visa, MC or both, in addition to Amex.

This all ignores that Visa/MC rules prohibit surcharging debit products even when they run as "credit" without PIN at higher swipe fees, so unless your point of sale is somehow smarter than anything I've ever seen in practice to discriminate on the BIN and automatically spare Visa/MC debit the surcharge, then your employees have to be absolutely eagle eyed to be compliant and not surcharge debit cad holders.

If you have guts and particularly if it's a small business, maybe tell them first so they can be educated and avoid network fines. If you do and they listen, you make a merchant realize they're doing something they aren't allowed to do and you get your desired end result (no surcharging), if they don't, you tried before the stick came in (network smackdown).

Visa was totally impotent on this during 2021 and just basically said that they reminded the merchant acquirer to tell the merchant to be compliant, but 2023 drastically changed the picture - Visa lowered their maximum permitted surcharge to 3%, started warning merchant acquirers to tell merchants that if they're not compliant there's going to be huge fines, and updated their merchant surcharge FAQ to say that they're sending secret shoppers around to check for non-compliant surcharging and merchant acquirers could be fined $1000+ for non-compliant surcharging (which the merchant acquirer is going to pass to the merchant with fees).

phltraveler

I created a wikipost after a more in depth review of the actual settlement text (which I linked in said Wikipost). It seems even weaker than I thought in my last post, because it's not four basis points reduction per year for three years, it's four basis points on the posted interchange rates for that entire period. The seven basis points is an average of all Visa/MC credit acceptance including fixed fees (10 cents per transaction in addition to a percent, for example), unavoidable network fees, etc... so this is really quite small. Essentially the 4 basis points in the three years (4bp total) is a subset of the reduction of 7bp average effective including fees (7bp total) for five years.

I would note that the settlement text allows merchants to enter a pilot to not accept Visa/MC debit/other non-credit Visa/MC products at all of their locations, initially starting as a pilot limited to 20% of outlets under a single banner/brand, but the surcharging term changes in this settlement apply exclusively to credit. So if a merchant is accepting Visa/MC debit, it won't change that these products are still not allowed to be surcharged (which many merchants do anyways, violating Visa/MC network rules).

Again, in practice, for any merchant that accepts Visa/MC/both in addition to Amex - surcharging is de facto not allowed. If they follow Visa/MC network rules and don't surcharge debit, they're breaking Amex network rules that all cards must be surcharged. If they surcharge all debit including Visa/MC, then even after this settlement, they would be violating Visa/MC network rules.

I guess that the possibility for merchants to decline to accept Visa/MC debit would allow a theoretical situation where a merchant declined to accept Visa/MC debit but accepted Visa/MC credit, surcharge Visa Credit/Mastercard Credit/all Amex, and that would be kosher with both networks (MC/Visa you don't accept debit so you can't surcharge it, Amex you're surcharging all other accepted cards equally). The difficulty with this option is that banks with >$10B assets are required to provide secondary networks for debit routing, but issuers with less are not under Durbin Swipe fee reform. Start trying to explain to consumers that your credit union or local/regional bank debit card isn't accepted because it's not from Citi/Chase/BofA/Wells Fargo...

So again, I don't really see this settlement practically changing much in the pervasiveness of surcharging. Most merchants that are violating network rules on surcharging now (most of them due to the Visa/MC and Amex catch-22 on their rules) will still be violating them if they accept Amex in addition to Visa/MC after this settlement.