Using a credit card with high fees
Young group showing credit card and chatting in restaurant

A recent article in the Wall Street Journal has drawn attention to several big merchants’ campaign to end the so called “honor all cards” policy of Visa and Mastercard. If a merchant wants to accept say Visa cards, for example, they must accept all Visa cards, regardless of issuer or the type of Visa card. Mastercard has the same rule for merchants who use their network.


But the problem merchants face is that some types of credit cards, especially higher tier rewards credit cards, charge higher processing fees. Some rewards cards can cost the merchant up to 3% of the transaction, whereas lower tier cards will often be under 2%. Merchants apparently paid at total of 43 billion dollars in credit card swipe fees in 2017, which is a 68% increase from 2012.


The WSJ says that Amazon, Target and Home Depot are likely to opt out of a recent successful court case against Visa and Mastercard in order to push through a case against the two companies for the right to selectively refuse certain cards. But they say it is unlikely that the “honor all cards” policy will end any time soon, the supreme court recently ruled in favor of American Express in a similar case. Amex was fighting off efforts for merchants to be allowed to offer discounts or incentives for customers who use cheaper cards and won.


In my opinion ending the “honor all cards” rule would be very bad news for consumers, not only because you would often miss out on opportunities to earn points, airline miles etc… but also because there would be less of a budget for issuers to provide insurances, lounge access etc… not to mention the headache of making sure you have a sufficient selection of credit cards in your wallet to meet the whims of merchants who refuse to accept your preferred payment method.


Saying that, I am sure there would still be some sweet spots, such as merchants who accept all cards in order to attract new customers or promotions where you get discounts for using certain cards etc… and we would find ways to rake in rewards points like we do now. But the whole thing would become more complicated and difficult. I also wonder how much merchants would actually save, since less acceptance of credit cards would lead to more use of cash, and the increased security fees associated with transporting large amounts of cash to the bank…


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