A landmark agreement between Visa Inc. and Mastercard Inc. and millions of US merchants could significantly alter the credit card rewards landscape. The deal allows US merchants to charge customers extra when they’re paying with certain types of Visa and Mastercard credit cards. This could potentially disrupt the world of luxury credit card programs in the US, where banks charge pricey annual fees in exchange for perks like airline miles or hotel stays and ride credits.
The agreement is the culmination of two decades of negotiations over credit card swipe fees, which have grown to a $100 billion-a-year business for the two networks and the world’s biggest banks. Retailers are expected to save at least $30 billion in credit card swipe fees in the coming years as a result of the deal.
As part of the agreement, merchants can now charge consumers more for using a card that carries the Visa Infinite or Mastercard World Elite branding, which typically come with a higher interchange fee than cards that rely on the standard Mastercard and Visa networks. For instance, a $100 transaction at a small restaurant would cost the merchant $2.60 in fees if a customer swipes a Visa Infinite card, compared to just $2.10 for a traditional Visa rewards card.
While the deal could save retailers billions, it also introduces a new layer of complexity for consumers, who may now have to pay more depending on the type of card they use. This could potentially impact the attractiveness of premium credit cards and their associated rewards programs.
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