Got a credit card? Listen up. The credit card wars kicked up a notch Thursday when a federal judge told American Express it can't stop merchants from encouraging customers to use rival credit cards, which often have lower transaction fees for the businesses. That could mean deals for shoppers.
Stores are planning to seize the new competitive advantage as soon as they can.
"Our clients are very eager and have been watching this case for years," said Jeffrey Shinder, counsel for a number of major merchants and groups, including Wal-Mart, Whole Foods, the National Restaurant Association, The Gap, the National Association of Convenience, and YUM! Brands. "You can expect to see a lot of these aggressively rolled out in the short term."
For example, an airline might offer a lower fare to a customer who uses a card with a lower fee, said Mallory Duncan, spokesman for the National Retail Federation. Or merchants might link loyalty benefits to a particular card.
You can expect to see creative and aggressive approaches online too, like free shipping or better customer service when paying with the card with the cheapest rate.
American Express says the antitrust ruling is actually anti-consumer, and plans to keep fighting.
"We plan to appeal the court’s ruling because we believe it will not provide any benefit to consumers and will in fact harm competition by further entrenching the two dominant networks,” the company said in a statement, referring to its rivals, Visa and Mastercard.
But unless they're able to stop the ruling, merchants will could start offering deals in as soon as 30 days. Most likely, said Shinder, companies will first try things out in small test markets before rolling them out nationally.
Besides being a "charge card" instead of a "credit card," where the balance needs to be paid off every month, American Express distinguishes itself from Visa and Mastercard by offering more premium perks on some of its cards. They include things like purchase protection, extended warranties and discounts and freebies on luxury travel options.
They come at a price, however. Merchants typically pay Visa or Mastercard a transaction fee of 2 to 3 percent of the purchase price, while American Expres's fees are usually about 1 percentage point higher, said Matt Schulz, a senior analyst for CreditCards.com.
Normally that cost is hidden from cardholders and American Express's rules prevented merchants from telling customers the card they chose might cost the store more. All they knew is that some stores wouldn't take American Express.
Now, all that could change.
"When you open the door to competition, wonderful things can happen," said Duncan.