Posted by William Charles on September 26, 2018
Credit Cards

Published on September 26th, 2018 | by William Charles

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Large Merchants Want The Right To Reject High Cost Premium Rewards Credit Cards

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?



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RMM
RMM

I think it is a part of negotiations to reduce fees for premium cards. Merchants do not want to confuse customers and let them go to other merchants. People who pay AF (which is common for premium cards) do not want to see their cards rejected…

Txstars
Txstars

Yes, this – negotiating tactic. They don’t want to lose sales by telling a customer they won’t accept their card because then the customer will just go to a competitor that does.

George
George

Agreed! Also, merchants like Costco are able to negotiate 0.4% fees, if I recall reading from the recent AMEX –> Citi Costco debacle? In that case, it didn’t matter which Amex or Visa the consumer paid with. So not sure I completely believe this whole story.

Jags
Jags

Costco pays no processing fees now. Banks want Costco customers because they are more affluent and will hopefully spend a lot of money elsewhere. AMEX already serves an affluent client base so I guess they made the decision that doing Costco for free wasn’t worth it to them (I guess doing it a 0.4% was). Citi on the other hand wanted to break into that customer segment so it was worth it for them to take a loss at Costco for upside elsewhere.

Emporio
Emporio

By the same token the average premium cardholder is definitely more affluent than the average cardholder. I can’t see Amazon making the business decision of refusing to accept a CSR, USB Altitude Reserve, Amex Plat, PRG, Ritz Carlton, UBS Visa Infinite, Amex Centurion and CNB Crystal Visa Infinite to save 1% in swipe fees and risk completely alienating these customers who like Sam might refuse to do any business with the merchant again.

frogger
frogger

I think Amex’s profits went up when they ridded themselves of the Costco deal. I bought Amex stock right when they lost it and my stock is up 100 percent since then.

luvmeciti
luvmeciti

And that’s also why Jud Linville is in the unemployment line.

frogger
frogger

So you can only use the Costco Visa at Costco? So you have to pay a membership fee to shop there and then they tell you which credit card to use and people still shop there? Crazy.

Novacat05
Novacat05

No, they accept any VISA card.

Steven
Steven

They take any VISA but they don’t accept other credit cards like AMEX or MC. There was a post a while back about using the Altitude Reserve at Costco. Costco membership cost is well worth it. I save hundreds every year shopping there vs any other store.

sam
sam

If a card I want to use EVER is rejected (not because it is simply a card) then I will not purchase from that retailer in the future (unless it is practically free) for me to do so.

Ferris
Ferris

I think the point is that these retailers are un-avoidable. I can promise that you will still shop at Amazon and Walmart because you’d rather spend 10% less on something as opposed to missing out on 1% extra rewards.

sam
sam

If that’s the case, or it somehow is exclusive to a retailer, I can promise you will save 100% by not purchasing it at all.

Ferris
Ferris

When you start wiping your butt with maples leaves from your front yard and raising cattle and growing vegetables on your lawn, let me know.

Wrg
Wrg

If “accept all cards rule” changed, then most merchants will follow suit, except maybe some high-end (high-margin) merchants such as 5-star Michelin restaurants or Rolex shops.

sam
sam

And like I said, I will save even more money not buying things.

Wrg
Wrg

if all grocery stores and local restaurants (except 5-star Michelin restaurants) do this, then are you going to survive by eating at only high-end restaurants ?
Kroger currently is not accepting Visa due to high fees, so the case that all grocery stores not accepting premium credit cards is very possible if allowed.

sam
sam

Food pantry

Fred
Fred

It’s not Kroger; it’s a 21-store chain owned by Kroger.

Simon
Simon

very good point.

rick b
rick b

These days, I can’t think of a single item that’s exclusive to one merchant OR is much cheaper there. I almost never shop at Amazon anymore, for example, because I can get same or lower price elsewhere, often with no sales tax + cheaper shipping, or I’ll just buy from a merchant who has B&M store in my area for easy returns.

frogger
frogger

Yeah people are lazy and shop at Amazon for everything and pay a higher price than they would get anywhere. The only thing I buy at Amazon are goods that are not available anywhere else.

Dylan
Dylan

My problen with all this is retailers arguments are “we will pass the savings to consumers” but this never happens, they keep the additonal profit for themselves. Remember the durbin amendment and how it ended the rewards programs on nearly all debit cards? Retailers were supposed to pass savings to consumers but that never happened. Prices stayed the same or continuted to go up as usual.

Same thing with rewards cards. If our rewards card programs go away then not only does it mean this whole community will cease to exist, we will still be paying the same or higher prices for everything, but this time with no rewards. Therefore the consumer loses out on rewards, the bank loses out on swipe fees, and the only person that wins are the retailers.

frogger
frogger

I don’t shop at Walmart at all. And barely shop at Amazon now. I would definitely stop shopping at Amazon if they didn’t accept premium cards. Amazon is more expensive than other on-line retailers anyway.

Ferris
Ferris

Amazon has nearly 50% of all retail sales online. Walmart has 17% of the grocery sales in the US. You are obviously somewhat of an exception, but I’m sure you bought things on prime day or in Christmas season when you needed something fast.

Steven
Steven

Amazon has a huge market share not because they are the cheapest. They used to be but not anymore. They have the largest market share because of their reputation, customer service, and conveinence. I personally very rarely shop at Amazon anymore. Almost everything I buy, I can get cheaper elsewhere or the same price at a B&M store.

Frogger
Frogger

No I don’t have prime so why would I shop there on prime day? And Amazon is slower than other online retailers if you don’t have prime.

I don’t mind ordering from Walmart online for toys as they are much cheaper than Amazon but I would never go into their stores. I tend to order from the source. For example k cups are much cheaper when ordering from Keurig. Or buy clothes from jcrew. Buy daughters close at tea collection.

Not a big consumer spender. Prefer spending money on travelling or fine dining.

Frank
Frank

“Sorry we don’t take CSR, CSP, CIP, Amex Plat, or Arrival+”

Zach
Zach

Ha, this is not going to happen. Cant imagine.

Jason_08
Jason_08

If anything, the more likely scenario is that visa will lower their fees, but in turn, we will get lower rewards

Yoni
Yoni

It would happen at the Chip reader swipe – an rather than the negative perception of “Declined” from bad PINs over CL, etc it would like state card not accepted by retailer on screen or it would fail to be add on Amazon (Sorry we can’t verify your card right now. Or similar neutral detail “were having a hard time verifying pls try again later”.

Both HD and Lowe’s offer a Job name input when I pay with a biz card (even at HD and the card os not in my Pro account yet and offer to add to my Pro-acct). They know all from the first 6 digits of the card aka BIN it’s how VGC get blocked at the Post office for MO’s.

frogger
frogger

Sorry we don’t accept cards from customers with the highest disposable income.

Frito Pendejo
Frito Pendejo

I only pay with discounted gift cards

Joe
Joe

Ah hahahaha. Awesome. I love this.

Larry
Larry

I have already had this happen to me in small businesses. They ask for a different card. May be illegal now but it is already happening.

Francisco J Rios
Francisco J Rios

I pick up breakfast every morning for everyone at work and they have started passing the fee on to me. My receipt shows my total but on my card I’m being charged more. I brought it to their attention and they stated they are now passing the fee on to the customer even though there was no sign up. I told them that and they put a sign the next day. I stopped going there but I also noticed that when they decided to pass the fee on to me it also stopped coding as 3x on my CSR. Should be against the law to charge more on a card than the receipt shows.

Avi
Avi

Report them! This is unacceptable behavior.

Lee
Lee

They cant do that. They can give a discount for cash but not charge a CC premium. Report them

CtownBin
CtownBin

I’m pretty sure that depends on the state, in some states it is perfectly legal to charge more if a customer is paying by cc (although of course you must inform them you will be doing so).

James
James

You have to notify them before they make the purchase though, it doesn’t look like they did that initially

Pablo
Pablo

Most important: I hope you made it clear to the owner that this policy has caused you to stop being a daily customer there. It doesn’t do any good to walk away if you don’t tell them why you did.

ThrustVectoring
ThrustVectoring

Do you still have those receipts? If you get charged a different amount than your receipt says, that means you can easily win a chargeback for getting charged incorrectly.

Stephen
Stephen

So, the rules are typically you can certainly pass CC fees onto the consumer, but only if you do it for all brands, all credit cards (debit might be excluded). However, most merchants don’t do that as it makes their products more expensive. But it is technically allowed (if it’s applied consistently). They also can’t, for example, charge you the CC fee because you order a lot, but not charge it to someone who orders less. Lastly, they can’t charge you a different fee for different cards (i.e. more for Amex) – See the recent supreme court ruling.

In your case, you should do two things:
1) Dispute the charge for anytime they charged the CC fee without notification. You’ll win easily. never pay more than your receipt.
2) Call chase and tell them this is a merchant you get 3x on, they’ll fix your points too. Especially since you used to get it.

sam
sam

Dispute the charge. Send in your receipt. Obviously they charged the wrong amount.

Max
Max

It’s against the ToS of the card issuers and they can get fined. Report them.

Francisco J Rios
Francisco J Rios

Didn’t know that. Who do you report them too? The credit card?

Darv
Darv

I would probably report it to network, e.g. Visa if it’s a Visa card. Many years ago I did this to a Taco John’s that went rogue and was surcharging. I think it was Discover at that time and I reported it to Discover. If it’s a Visa card then I’d report it to both Visa and to the issuing bank (e.g. Chase).

Max
Max

Yes, 1-800-VISA-911. Visa will then call the merchant and scare the bejebus out of them, threatening to remove them from the network

Max
Max
Ann
Ann

You can report surcharging businesses to Visa/MC/AmEx. But it’s allowed in more situations than it used to be, due to court cases in the past few years.

It is also against state law in a few states: https://www.creditcards.com/credit-card-news/california-court-ruling-no-card-surcharge-law.php

Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Oklahoma, Texas, and Puerto Rico still have surcharge bans that haven’t been struck down in court yet. California and New York have had to suspend enforcement of their bans.

In the states where it is still banned, you can report the business to the state Attorney General’s office.

Ann
Ann

Here’s what Visa says about minimums (another thing they’ve been forced to start allowing in recent years in the US) and surcharges: https://usa.visa.com/support/consumer/visa-rules.html#3

Q. A merchant required a minimum purchase amount in order for me to use my Visa card. Is this allowed?

A. In general, a merchant is not permitted to establish a minimum or maximum amount for a Visa transaction. However, exceptions apply in the U.S. and U.S. territories, such as Puerto Rico, U.S. Virgin Islands, and Guam. In those locations and only for credit cards, a merchant may require a minimum transaction amount of US $10 and government agencies and education merchants may establish a maximum transaction amount. If a merchant refused to accept your Visa card for on the basis that the merchant requires a minimum or maximum amount on a Visa debit card, or the amount on a credit card is greater than US $10, please notify your Visa card issuer.

Q. Is a merchant allowed to add a surcharge to the purchase amount for using a Visa card?

A. In general, no. Surcharging is currently permitted in Australia, Mexico, and New Zealand, and on certain credit card transactions in the U.S.

Surcharging isn’t allowed everywhere in the U.S. Currently, there are laws limiting surcharging in Colorado, Connecticut, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. California’s and New York’s laws limiting surcharging have been enjoined from enforcement pursuant to court orders, but appeals are pending. An order upholding Florida’s law limiting surcharging was reversed on appeal, but remains subject to further litigation. Consumers who are subjected to a surcharge in states where they may be prohibited from surcharging may want to report the retailer to their state attorney general’s office.

Ann
Ann

Mastercard has been allowing surcharges in the US since a 2013 court case. https://www.mastercard.us/en-us/merchants/get-support/merchant-surcharge-rules.html

“Merchants are permitted to apply either a brand-level surcharge or a product-level surcharge to Mastercard credit cards. A brand level surcharge is one where the merchant charges the same percentage on all Mastercard credit cards. A product level surcharge is one where the merchant imposes a surcharge on a particular Mastercard credit product. In both circumstances, the level of the surcharge is subject to a [usually 4%] cap.”

This is still a violation of state law in the aforementioned states, however. And all surcharges are now banned in the UK, if you travel there: “On the 13th of January 2018, the Government is to enforce the ban on the practice of surcharging consumer cards wherever they are accepted in the UK.”

Kevin
Kevin

That’s why you pay with Samsung/Apple/Google pay at these small businesses – use the card you want, they won’t be able to discriminate. Samsung pay is even better – you don’t even need special terminals.

Francisco J Rios
Francisco J Rios

Reported to visa. I’ll call Chase later today.

Yoni
Yoni

Sadly Chase doesn’t allow Biz cards in mobile wallets (kinda of silly as they are lower fraud risk). But thankfully they aren’t the only Biz card issuer.

Hmm I’ll test this it would be great if they are obscuring the IIN/BIN Issuer Identification Number (IIN), bank identification number (BIN) first digits of a card 4246 31 = Chase ink family (Visa).

Cpaynter
Cpaynter

Do you have any evidence of that? It seems that in other contexts merchants can “see through” Android/Samsung/Apple pay to the actual card being used. For example, Costco will not accept a mobile pay transaction that resolves to a mc, Amex or Discover card because they only honor Visa. Not sure why a merchant couldn’t do the same thing here.

Lrdx
Lrdx

*Pay systems don’t change the payment network. They randomize a card number for each transaction, but a Visa will stay Visa, a MC will stay MC etc.

Costco is just keep doing their thing of rejecting anything that’s not a Visa.

Yoni
Yoni

IIRC 1st digit would never change i.e.

3=Amex
4=Visa
5=MC
6=Discover ?

But I’m going to test the S-pay at HD & Lowe’s -they always offer to input job name on physical Biz card swipe/read .

Lrdx
Lrdx

I’d guess they keep the whole IIN/BIN prefix, not just the MII (“the 1st digit”).

Yoni
Yoni

Lrdx
I post a DP once late when I know more

Crystal Pistol
Crystal Pistol

I think the discussion was that the merchant wouldn’t be able to see you pull your CSR or Amex Plat out and try to pay with it if they were trying to discriminate, only taking the non-premium cards. Any of the digital wallets wouldn’t show the merchant what card you were trying to use. Of course, in the case of say Costco, you will still need a VISA and not a MC or Amex or whatever.

Lisa
Lisa

Curious, at least two different restaurants, in different states, don’t accept our CSRs. The cashiers warned us that the CSR’s will be rejected, tried to run it, and indeed rejected. Other Visas worked. Anyone know why?

RAM

Did you get the rejected receipt? Maybe they simply did not even swipe the card and pretend they did

MJG
MJG

Could also be them thinking their machine is having problems with metal cards in that case.

Yoni
Yoni

Lisa 1st six digits of card ID issuer and card type i.e. 4246 31 are Chase Ink cards (Visa) or at least part of the digits.

Don’t have a BIN table.

Jags
Jags

Doubt it will happen—can you imagine the confusion to the consumer if they did that? “Sorry sir do you have another card? Oh we don’t take that one either. Do you have another one? No? Okay well there’s an ATM at the front of the building, please take out $3000 cash for all these appliances you’re buying.”

These merchants have already baked in the cost of the credit card processing into the price of the goods. This is just a way to increase the cost to the consumer without raising prices. Amazon already offers a 2% bonus when you load your giftcard balance with your checking account. If they instead offered a 2% discount at time of purchase for using a direct checking debit maybe they’d save more money that way than by getting stupid headlines like this.

If I were Visa or Mastercard I would just say “if you won’t take all of our cards then we cannot be your vendor”. Far be it from me to defend banks, but can you imagine the phone calls they would get from customers “Target rejected my card what’s going on?”

Elmer
Elmer

And imagine the average Walmart or Target or McDonalds cashier trying to remember which cards are accepted or denied? What a mess. It’s all posturing to get lower fees from the banks.

Sid
Sid

There are going to be a lot of butt hurt people who come to this site for cc deals if companies are allowed to proceed with this.

quasimodo
quasimodo

Thought the swipe fees were standardized….my ignorance!

Abelian Grape
Abelian Grape

They are standardized, but vary by network and card level/tier.

Max
Max

I think this is moronic. Are they going to direct all cashiers to be on the look out for an ever growing set of premium cards? Look out for CSR, USB Altitude Reserve, Amex Plat, PRG, Ritz Carlton, UBS Visa Infinite, Amex Centurion, CNB Crystal Visa Infinite…

Yoni
Yoni

It’s in the Cardreader software/firmware it IDs off 1st digits Max

Big corps aren’t going to leave money on the table based on the lowest common denominator.

Cpaynter
Cpaynter

I think the distinction would be handled programmatically, either by the POS system or the processor. The card will simply be declined. Of course the poor cashier will probably take the brunt of abuse from the customer whose card is rejected.

Heck, about once a month I get behind some fool at Costco who is confused and indignant that his MasterCard, Discover or AmEx isn’t honored there. 🙄

PT
PT

Interesting. I’ve never heard/seen any non-Visa card issues like this & I shop at Costco regularly.

Abelian Grape
Abelian Grape

Of course not. Have you heard of computers? They’re pretty good at memorizing things. Most retailers have a few, even at checkout counters.

Sa
Sa

why don’t the merchants just negotiate a flat fee to use the network. If the issuer of the cards wants to offer rewards to the user, let the issuer carry the bag. Costco’s case is an example of how it could work.

PT
PT

They want to pay low fees for the low rewards or debit cards, but ALSO pay low fees for rewards cards.

A flat fee would defeat the purpose of lowering their costs.

Lrdx
Lrdx

Costco’s case is based on exclusivity; Visa agreed to a low fee in exchange that competitors are not allowed in store. I doubt Amazon and Walmart can work with only one card network.

MickeyMouse
MickeyMouse

Isn’t Costco now accepting ApplePay though? Meaning you can use other cards in store.

Lrdx
Lrdx

You still can’t use any card that’s not a Visa.

Abelian Grape
Abelian Grape

Because the networks don’t want to.

MickeyMouse
MickeyMouse

I really don’t see this as being an issue for Target and Amazon though as the Premium Rewards Cards don’t usually get used there. Who’s going to use CSP/CSR at Target/Amazon and only get 1ppd when they can get 5% off using a Target RedCard or even 1.5% using FU then transfer that to CSP/CSR???

Jags
Jags

FU is no different than CSR. Visa Signature/Visa Infinite are both “top tier” when it comes to fees charged to merchants.

MickeyMouse
MickeyMouse

I don’t know anyone with a Visa Sig Freedom Unlimited. That would mean a 5k CL…I know some people would use it to MS but the majority of people have a FU with a line less than 5k, meaning it’s not Visa Sig.

Abelian Grape
Abelian Grape

I have two.

PT
PT

I don’t claim to know the breakdown on FU between Sig & non-Sig, but I would venture to guess that there are a large number of people with Visa Sig FU cards. Visa Sig cards are very common in general & 5K is not a high limit. I have a lot of cards & only one is just under $5K.

The other thing to keep in mind is that most people use a card or two for general purchases & don’t use highly targeted methods like people here, so they will use them places that only get 1%. That is how card issuers stay in business. Discover’s reward costs average out to about 1.38% according to their report. They lose money on people like me who only use their card for 5% categories.

Atul
Atul

I see retailer point as well. Higher cost for certain, specific card results in unpredictable card processing fees, saving on this front would eventually result in better prices.May be I am too wishful.

Amazon should simply create a wallet where you link and load it from your bank account an get 4-5% off straight.This would cut the middleman.

ThaigerNation
ThaigerNation

AMZ currently gives you 2% bonus when you reload your ‘wallet’ via ACH

Lrdx
Lrdx

They already do that. You can load your Amazon account by ACH and get 2% extra.

Target has the debit card that is practically allowing Target to pull funds from your bank account directly. It gives 5% off.

Blue
Blue

I don’t see any way merchants actually start denying one Visa or MC over another.

frogger
frogger

The funny thing is this won’t save them any money. As they have competitors. If they have lower fees so will their competitors. So their competitors will just lower their prices for whatever they save.

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