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Visa and MasterCard earlier this week He agreed to the settlement With US merchants, they promise to reduce the fees stores have to pay to process credit card payments — at least in the near term.
The settlement opens the doors for retailers to place additional fees on cards with higher swipe fees, which could make it more expensive to use a premium card with a mega rewards program. 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 would lead to any major changes for credit card users.
He said the settlement does not appear to have “any impact on the credit card holder.” Michael Kinsmanprofessor emeritus of finance and accounting at Pepperdine University in California who runs a CPA firm in Laguna Beach.
What did the settlement say?
Visa and Mastercard have denied any wrongdoing, but have agreed to a number of near-term changes as part of the settlement. among them:
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- The companies will reduce interchange rates — the fees merchants must pay to process a credit card payment, also referred to as “swipe rates” — by at least 4 basis points (0.04 percentage point) for three years.
- Rollover rates should be at least 7 basis points lower than the current average for the next five years.
- Merchants will be able to more easily direct customers to other payment methods, and can charge additional fees for premium credit cards with higher swipe fees.
The settlement is still subject to court approval, and any changes will not take effect until late 2024 or 2025, according to the British Daily Mail. Statement from MasterCard.
What does this mean for credit card holders?
Patrick Paynean associate professor of personal and family financial planning at the University of Arizona in Tucson, doesn't expect “radical changes” from the settlement but believes it could lead to more expensive premium cards.
The cards are already expensive; For example, the Chase Sapphire Reserve charges an annual fee of $550 for perks like access to an airport lounge membership and a $300 annual travel credit. The annual fee for the Platinum Card from American Express is about $700.
Premium cards are more expensive for merchants, too. The National Retail Federation says pass-through fees Average about 2% per transaction But it can be up to 4% for premium rewards cards.
If this settlement is approved, merchants will have the ability to charge customers more for using premium Visa and Mastercard credit cards.
But it's not clear that stores will do that Wants To charge more from these customers, according to Lulu Wang, assistant professor of finance at the Kellogg School of Management in Evanston, Illinois. Making some customers — especially high-paying customers — pay extra fees threatens to ruin relationships and hurt business.
“People talk about some of the changes it could offer to merchants, but these changes seem like a big pain…to implement,” he said.
“If they tried to do this, customer relations would be absolutely terrible. They would have eggs on their faces,” Kinsman added.
Credit card debt:Again, by 2024, Americans will have more credit card debt than their savings. How much do they owe?
Will merchants pass on their savings to consumers?
Retailers that accept Visa and Mastercard are expected to do so Saving at least $29.79 billion In the five years following the settlement, according to a statement from one of the law firms representing American merchants in the lawsuit.
In theory, merchants can pass some of these savings on to customers by lowering prices. This can be especially prevalent in small businesses, according to Payne of the University of Arizona.
“They may be able to offer more competitive prices to attract people from larger retailers,” he said.
But other experts say consumers shouldn't get their hopes up.
“Most people wouldn't know about (the settlement) anyway,” said Kinsman, a professor emeritus at Pepperdine University. “So why would I, as a merchant, pass these costs on to my clients?”
What will Visa and MasterCard do?
Beverly HarzogThe author of “The Debt Escape Plan: How to Free Yourself of Credit Card Balances, Boost Your Credit Score, and Live Debt-Free,” said she doesn't expect much to change between credit card issuers after the settlement, in part because the changes aren't a “solution,” she said. Always,” she said, adding that the three- and five-year time frames give companies little time to make significant changes.
“It's like trying to convert a giant cruise ship,” she said. “It takes a lot of time, and sometimes, by the time they're ready to make that shift, the market changes again.”
Warn her? If one credit card issuer decides to make a change after settlement — whether it's raising annual fees or rolling back certain benefits or perks — others are likely to follow.
“I'll wait for the first domino,” Hartzog said. He added: “At the moment, I do not expect that, just because this (settlement) has not been finalized. Even if it is, it is a temporary solution and things will return to normal within two years.”
Visa plans to maintain its “bonuses and access to credit” if the settlement is approved, according to a statement citing Kim Lawrence, the company's North American president, who was… Released earlier this week. Spokespeople for Visa and Mastercard did not immediately respond to requests for comment sent after regular business hours on Friday.
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