Deal Could Have Merchants Rejecting Your Credit Card

A proposed settlement would upend a long-standing credit card industry rule, giving merchants new power to reject high-fee rewards cards. For consumers, this could mean a real possibility of having their favorite rewards card declined at checkout. The deal, the result of a 20-year legal battle between Visa, Mastercard, and merchants, breaks the "honor all cards" rule that once required retailers to accept every credit card from a brand if they accepted any at all, per the Wall Street Journal. Now, merchants can turn away premium cards with high interchange fees—often 2% to 2.5% of a purchase. Merchants paid $83 billion in such fees last year, a 71% jump since 2019, as more shoppers reach for plastic over cash.

Retailers have long pushed to break the "honor all cards" rule, hoping to rein in rising costs as credit card use—especially for rewards cards—has soared. For them, the settlement is at least a symbolic win, though its practical effects remain to be seen. Merchants can now either accept or reject one of three categories of credit cards—standard, commercial, and premium, per CNBC. But as the most popular, higher-fee cards are grouped together as premium cards, stores risk alienating customers if they move to block them. Some may choose instead to add surcharges for those higher-fee cards.

Much is still to be determined, however, as the settlement has yet to be approved by a judge, per CNN. And some merchant groups continue to push for better terms. The proposed settlement reportedly requires Visa and Mastercard to lower interchange fees by 0.1% over five years, per CNBC. But merchant groups say that's only equal to the average yearly increase in interchange fees. "The reduction in swipe fees doesn't begin to go far enough, and the change in the honor-all-cards rule would accomplish nothing," says National Retail Federation Chief Administrative Officer and General Counsel Stephanie Martz, who suggests "it's time for Congress to take action."