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Will Your Points and Miles Be Impacted by the Credit Card Legal Settlement?

In the U.S. credit cards are big business for airlines.

Visa and Mastercard have settled litigation with U.S. merchants, ending a long-standing legal case over the swipe fees the credit card processors collect every time a customer uses them to make a purchase. The settlement will lower the swipe fees and institute a cap through 2030. The settlement also allows smaller merchants to bargain collectively with Visa and Mastercard over the fees. The settlement will also allow merchants more latitude to offer discounts for cards with lower processing fees, or add surcharges for cards with higher fees—something that is currently prohibited under card issuer covenants. 

Visa and Mastercard are technically payment networks, which process credit and debit card transactions on behalf of issuing banks, charging a fee to merchants to process the payments. Fees to merchants, ranging from 1% to 3% (a portion of which are paid to the issuing banks) are often passed along to customers in the form of higher prices for goods and services to cover the merchant’s business costs. 

The lawsuit, which was filed on behalf of merchants in 2005, alleged that Visa and Mastercard, along with their issuing banks, colluded to keep the fees high, violating antitrust laws. The settlement agreement is in addition to over $10 billion already paid by Visa and Mastercard to settle separate suits from merchants in 2018 and 2023.

The settlement effectively negates legislation proposed last fall in the U.S. Senate, which would have introduced slightly different rules allowing merchants to shop for different processors for Visa and Mastercard-issued cards. The settlement will allow the merchants to more easily bargain for lower fees. 

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So How Does This Affect Credit Card Points?

Banks that issue credit cards have long dangled travel loyalty points and other perks to attract new cardholders and incentivize them to spend more on the cards. Card issuers pay airlines, hotels, and other travel companies for the points they issue when their cardholders transact a purchase, and they rely on the revenue from swipe fees to help pay for those perks. 

The law firm that announced the settlement put the value of merchant savings via reduced swipe fees at nearly $30 billion. A portion of that $30 billion represents a reduction in fee revenue by issuing banks, meaning that they’ll have less revenue to spend on incentives like loyalty points. 

In response to the Senate’s proposed legislation, some industry watchers and airlines (who reap significant revenues from the sale of loyalty points from branded swipe-fee supported credit cards) claimed that introduced caps on swipe fees could compromise the incentives they pay to cardholders. However, it’s worth noting that travel companies in Europe (where swipe fees are already capped significantly lower by E.U. statute) continue to offer their customers points-earning credit cards in spite of the lower fee revenues earned by the issuing banks. 

In the U.S. credit cards are big business for airlines. In their 2023 Investor Presentation, Delta Air Lines reported that transactions on the airline’s branded American Express cards accounted for 1% of the United States Gross Domestic Product. The company reported $6.8 billion in revenue from Delta-branded American Express cards in 2023, and has set a long-term goal of $10 billion. 

Credit cards issued by U.S. institutions accounted for $5.8 trillion in purchase volume in 2023. The top card issuers included Chase Bank, American Express, Citi, Capital One, and Bank of America. Each of those issuers counts travel credit cards in their portfolios. Visa and Mastercard combined accounted for 86.5% of card payment transactions (including debit cards) in 2023.

Visa and Mastercard have denied wrongdoing in agreeing to settle with merchants.