The WSJ is reporting that large merchants such as Amazon & Target want the right to be able to reject some premium rewards credit cards that carry high processing fees. Currently if a merchant accepts Visa or Mastercard they have to honor all cards that run on that payment network. Large merchants want to be pick and choose what cards are accepted, this because the fees involved in accepting these premium cards can be as high as 3% where as other cards are in the 1-2% range.
Recently a number of large merchants opted out of $6.2 billion settlement with Visa, Mastercard and some card issuing banks over swipe fees. Believing that they will be able to negotiate a better payout individually. Regarding possible changes to the ‘accept all cards rule’ the following statements were made:
“If a merchant agrees to accept Mastercard, there cannot be any discrimination between different issuers’ cards or between different types of cards issued by one financial institution,” a Mastercard spokesman said.
“Visa believes consumers should always have a choice in how they pay, including being allowed to use their Visa credit card regardless of the card type or issuer. When consumer choice is limited, nobody wins,” said a Visa spokeswoman.
Final Thoughts
If merchants are successful in getting the the ‘accept all rule’ changed then it almost certainly spells bad news for those with premium credit cards. Card issuers and payment networks have been able to offer increased rewards and benefits on these cards precisely because of the increased interchange fees charged. That being said I think this has the potential to be a nightmare for consumers and smaller card issuers as well, what if merchants decide to stop accepting cards from smaller card issuers entirely? How are individual consumers to know where each card is accepted?
