By AnnaMaria Andriotis
Premium credit-card users are in for a big surprise: Their JPMorgan Chase Sapphire Reserve, and many other rewards cards, could soon be rejected by merchants.
A settlement between Visa, Mastercard and merchants over a 20-year legal battle is crossing for the first time a red line for the credit-card industry by breaking the networks' rule that forces a store that accepts one Visa credit card to accept all Visa credit cards. The deal was announced Monday, confirming an earlier report in The Wall Street Journal.
No longer would merchants have to "honor all cards," instead they can reject credit cards that charge merchants bigger fees for each transaction, a concession Visa, Mastercard and banks have balked at for ages. Big merchants have fought for many years to break the rule, making the settlement at least a big symbolic win, but they will still lack the total freedom to choose which cards they accept, leaving the real-life impact unclear.
Some big banks were furious about breaking the rule, according to people familiar with the matter.
For consumers, this means that many of the rewards cards they have grown addicted to can be rejected at the register while other low- or no-frills credit cards, which tend to be cheaper for stores, would be accepted.
The change could impact a majority of credit cards, though merchants would face a difficult choice of upsetting customers or losing sales if they make the decision to reject the higher-fee cards.
On merchants' possible blackout list: many airline and hotel rewards cards and general-purpose rewards cards from the biggest banks whether it is a no-annual-fee card that offers cash back or a top-shelf card that charges hundreds of dollars in annual fees for access to travel lounges and generous points.
At the root of the legal battle between merchants and networks are so-called interchange fees, which Visa and Mastercard set and that merchants pay to banks that issue the credit cards to consumers.
Those fees often range between 2% and 2.5% of the purchase price and in 2024 resulted in merchants paying $83 billion to card issuers, up 71% from 2019, according to trade publication The Nilson Report.
The costs became an even bigger problem for merchants as consumers have increasingly shifted from paying with cash to paying by credit card and in particular using rewards cards more often. The fees per transaction have also gone up.
For the banks, interchange income has fueled the expansion of rewards, as they pass the fees back to well-off consumers in the form of points, cash back or other perks, driving increased spending on their cards and resulting in more people signing up for them.
In the lawsuit, which dates back to 2005, merchants sued Visa, Mastercard and large banks, alleging that they engage in anticompetitive behavior with interchange fees and acceptance terms.
The goal for big merchants and merchant trade groups has long been to break the honor-all-cards rule. They had already broken the card networks' rule that linked both debit- and credit-card acceptance and now with this agreement have made the first crack on the credit-card rules that angered them.
Under the settlement, credit cards will fall into three buckets that merchants can choose to accept or reject. Those buckets are wide however, and the most popular cards that make up a majority of spending are grouped together in one category, making rejection a risky prospect for a store.
More merchants, especially small businesses, in recent years have begun passing on the interchange fees they incur to consumers by charging them more when they pay with credit cards. The settlement could make surcharging the credit cards that fall into the rewards category more common.
Still, the agreement could face more challenges in court. A deal last year crumbled when a judge rejected it after some merchant lawyers objected. Early indications from lawyers representing big merchants and merchant trade groups is that this settlement doesn't go far enough -- and a 20-year legal battle might not yet be over.
Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com
(END) Dow Jones Newswires
November 10, 2025 12:45 ET (17:45 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
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