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Credit Card Swipe Fees Are Going Down. Are Points Going With Them?

On Tuesday, the biggest bank card corporations within the United States reached an agreement with merchants to scale back the so-called swipe fees retailers pay for accepting bank card payments, potentially saving the retailers $30 billion.

These fees also help fund the bank card rewards programs that many travelers redeem for things like free flights and hotel stays, leading points hawks to wonder: Are loyalty programs in danger?

Here’s what we all know thus far concerning the changes.

Last yr, bank card payments generated an estimated $72 billion in fees paid by merchants, that are generally passed along to customers in the shape of upper prices. For nearly 20 years, merchants have been searching for reductions within the fees they pay Visa and Mastercard for handling transactions where the cards are used.

The proposed settlement, awaiting approval in a federal court, reduces and caps those fees for five years. It would also allow merchants to potentially charge consumers more based on the cardboard they pay with. For example, an individual paying with a premium card just like the Chase Sapphire Reserve, which costs $550 a yr, may very well be charged greater than someone paying with the more basic Chase Sapphire Preferred card, with an annual fee of $95.

The majority of the fees collected return to the banks that issue the bank cards. Those banks have used the funds to push premium bank cards that provide loyalty points, which might be redeemed free of charge travel and other perks. The cards with the most important advantages are likely to be people who charge higher swipe fees.

While the reduction within the fees collected sounds small — averaging a minimum of .07 percent — they represent an estimated $30 billion over the five-year term of the deal, which banks could attempt to make up by reducing points perks.

“It’s reasonable to think that,” said Brian Kelly, the founding father of the Points Guy, a news site dedicated to maximizing bank card points.

While he speculated that banks will have the opportunity to “find other ways to make up the difference,” he acknowledged that a points squeeze could emerge.

“Opportunities to earn probably aren’t going to flourish,” he said.

The concept that merchants could charge more to the holders of premium, perks-rich cards, that are expensive, may additionally deter consumers from using them. Some experts query the viability of the practice given the potential for consumer backlash.

The legal actions that led to the brand new bank card agreement date back to 2005. But the newer Credit Card Competition Act, proposed in 2023, goals to introduce more competition within the bank card payment system. By creating a less expensive alternative pipeline for processing payments, the proposed laws is seen as a greater threat to rewards programs.

Responding to the just-announced agreement between the bank card corporations and retailers, Senator Dick Durbin, Democrat of Illinois, and the lead sponsor of the Credit Card Competition Act, released a statement urging the act’s passage.

“I fear that this deal only provides temporary concessions negotiated by just a few lawyers behind closed doors,” he said within the statement.

Other experts said the agreement may ease the pressure on Congress to pass the act.

“I feel it’s a way for Visa and Mastercard to point out that they’re making a good-faith effort to assist out merchants by lowering the fees they’ve been complaining about for 20 years, and hopefully enough to let senators know they’re doing their part,” said Chris Hassan, the social media and brand manager for Upgraded Points, an internet site that tracks bank card advantages.

Separately, the proposed merger between Capital One and Discover, which is pending federal approval, could introduce more competition amongst bank cards and potentially improve rewards for holders of those cards.

The points and payments systems won’t change until the agreement is approved, which is expected in late 2024 or early 2025, based on a news release from Mastercard.

But the subject should remind travelers of the truth of fidgeting with points: The rules all the time change. Values are likely to fall as redemption levels rise, which corporations issuing these currencies are free to regulate at will.

If you’ve gotten points, spend them, say experts like Sara Rathner, a travel and bank card specialist on the financial website NerdWallet. “They’re not a trophy to dust and admire.”


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