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

The settlement opens doors for retailers to place surcharges 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 down savings to customers.

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

The settlement doesn’t appear to have “any bearing on the credit card holder,” said Michael Kinsman, an emeritus professor 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 a number of changes in the near term as part of the settlement. Among them:

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• The companies will lower interchange rates – the fee merchants have to pay to process a credit card payment, also referred to as “swipe rates” – by at least 4 basis points (0.04 percentage points) for three years. 
• Swipe rates must be at least 7 basis points below the current average for the next five years. 
• Merchants will be able to more easily steer customers to other payment methods, and can impose surcharges on premium credit cards with higher swipe fees.  

The settlement is still subject to court approval, and any changes would not go into effect until late 2024 or 2025, according to a statement from Mastercard.

What does this mean for credit card holders?

Patrick Payne, an associate professor of practice in 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 cards are already pricey; Chase Sapphire Reserve, for instance, has a $550 annual fee in exchange for perks like access to airport lounge membership and a $300 annual travel credit. The annual fee for the Platinum Card from American Express is nearly $700. 

Premium cards are more costly for merchants, too. 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 stores would want to charge these customers more, according to Lulu Wang, an assistant professor of finance at the Kellogg School of Management in Evanston, Illinois. Making certain customers ‒ especially high-paying customers ‒ pay an extra surcharge threatens to sour relationships and hurt business.

“People talk about some changes it can make for merchants, but those changes seem like such a giant pain … to implement,” he said. 

“If they tried to do that, the customer relations would be just bloody awful. They'd have egg all over their face,” Kinsman added. 

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Will merchants pass down 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 by one of the law firms representing U.S. merchants in the lawsuit. 

In theory, merchants could pass down some of those savings to customers by lowering prices. This could be especially prevalent in smaller businesses, according to Payne from the University of Arizona.

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

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

“Most people aren't going to know about (the settlement) anyway,” said Kinsman, the emeritus professor at Pepperdine University. “So why would I, as a merchant, pass those costs back 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, in part because the changes aren't a "permanent fix." The three- and five-year time spans give the companies little time to make significant changes, she said.

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

Her caveat? If one credit card issuer does decide to make a change after the settlement – whether that’s raising an annual fee or pushing back on certain benefits or perks – others will likely follow.

“I would watch for that first domino,” Harzog said. “And right now, I'm not expecting that, just because this (settlement) hasn't been finalized. Even if it is, it's a temporary solution and things go back to normal within a couple of years.”

Visa plans to maintain 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, that was released earlier this week. Spokespeople for Visa and Mastercard did not immediately respond to requests for comment sent after normal business hours on Friday.