Credit card tier discrimination may be coming: New Visa-Mastercard swipe settlement could reshape rewards—and surcharges

A newly proposed settlement between Visa and Mastercard could reshape how much merchants—and ultimately, consumers—pay to use their payment networks, while giving stores more flexibility to treat high-end and mid-tier cards differently.

If approved by the court, the payment giants would reduce interchange fees by 0.1% over the next five years and cap standard consumer credit rates at 1.25% for eight years. It would also scrap a rule requiring merchants to accept all cards from a given network. That change could open the door for stores to reject credit card tiers—such as higher-fee, high-reward cards like the Chase Sapphire Reserve or Capital One Venture X—or further pass fees directly to consumers.

The current system has long frustrated merchants, especially small businesses, who must decide whether to absorb rising swipe fees or pass costs to customers. Visa and Mastercard collected $111.2 billion in credit card swipe fees in 2024—up 10% from the year prior and quadruple the level from 2009, according to the National Retail Federation. 

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.”

Trade group argue the deal fails to protect merchants

Many trade groups criticized the settlement, arguing it doesn’t go far enough to protect merchants.

“Once again, this proposal is all window dressing and no substance,” National Retail Federation Chief Administrative Officer and General Counsel Stephanie Martz said in a statement. “The reduction in swipe fees doesn’t begin to go far enough, and the change in the honor-all-cards rule would accomplish nothing. If the courts can’t fix this, it’s time for Congress to take action.”

The National Grocers Association added that the proposed settlement does not address the “anticompetitive price-setting in the credit card industry.”

“Independent grocers, operating on net margins of less than 2%, have been hit hardest by rising swipe fees, which grow faster than inflation and cost consumers and businesses over $100 billion annually,” wrote Chris Jones, NGA chief government relations officer and counsel.

A previous Visa-Mastercard agreement was denied earlier this year, so it remains to be seen if this new proposal will ultimately be approved.

Lawmakers have also floated reform through the bipartisan Credit Card Competition Act, which would reduce swipe fees and target the “Visa-Mastercard duopoly” by requiring secondary networks on credit cards. The measure, which was first introduced in 2023 and backed by then-U.S. Senator J.D. Vance, could put additional pressure on payment giants if the settlement doesn’t satisfy regulators—or merchants.