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?
The only way we as consumers can combat this is to not shop at stores where they don’t let us use our rewards cards. Of course, greedy Americans will never do this. They gotta have their stuff.
Three player game: merchant, middleman, customer. Which one is the sucker?
Wont happen. If cards cave-in at all the will simply make the average card fee across all cards. We all know that when we make an order they aren’t going to reject orders saying “We accept Visa, but not THAT Visa”
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.
I don’t see any way merchants actually start denying one Visa or MC over another.
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.
AMZ currently gives you 2% bonus when you reload your ‘wallet’ via ACH
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.
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???
FU is no different than CSR. Visa Signature/Visa Infinite are both “top tier” when it comes to fees charged to merchants.
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.
I have two.
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.
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.
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.
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.
Isn’t Costco now accepting ApplePay though? Meaning you can use other cards in store.
You still can’t use any card that’s not a Visa.
Because the networks don’t want to.
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…
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.
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. 🙄
Interesting. I’ve never heard/seen any non-Visa card issues like this & I shop at Costco regularly.
Of course not. Have you heard of computers? They’re pretty good at memorizing things. Most retailers have a few, even at checkout counters.
Thought the swipe fees were standardized….my ignorance!
They are standardized, but vary by network and card level/tier.