NEW YORK — Paying with certain credit cards may soon earn you perks at the register.
Under a settlement with the Justice Department announced Monday, Visa and MasterCard agreed to let merchants offer customers discounts and incentives for using a particular type of card.
The settlement lets retailers express preference for a particular card issued by Visa or MasterCard, such as a basic card vs. a rewards card, or for cards from another brand such as Discover.
Here are some questions and answers about the case and what it means for consumers.
Why do merchants prefer that customers use a particular credit card?
For any credit card purchase, merchants pay a fee to the banks issuing the card that vary.
Discover cards on average tend to have lower fees, and American Express cards on average have higher fees, said Mallory Duncan, general counsel for the National Retail Federation.
Merchants tend to prefer that customers use debit cards rather than credit cards because they have lower fees.
What type of incentives might be offered for using a particular card?
The first change will likely be that customers will be steered toward an alternative form of payment that bears lower costs for the merchant. Eventually, merchants may make more subtle distinctions in stating a preference for more basic credit cards.
Does this mean merchants will stop accepting rewards and other cards that cost them more?
No. Visa and MasterCard can still require merchants that use their payment networks to accept all cards within their brands. But now, retailers will be able to offer discounts for lower-cost cards or other forms of payment.
Merchants already have the right to refuse acceptance of cards from an entire payment network, of course. American Express and Discover, for example, aren't as widely accepted as Visa and MasterCard. But Visa and MasterCard are so universal that merchants generally agree to the companies' terms.
Didn't the overhaul of the financial regulations address this issue?
Yes, but different aspects of it. Under the new regulations signed into law in July, merchants will be allowed to require a $10 minimum purchase for credit card purchases.