Card Steering

Everything good has a cost. Credit card payments may be fast and convenient, but it takes a complex and intricate underlying framework to support them. The costs of maintaining the credit card payment system are mainly covered by the interchange fees merchants are required to pay, and these costs can vary between card brands.

Merchants can potentially lower their payment processing costs by using incentives to “steer” their customers toward the use of cheaper credit card networks, but this practice has been the subject of high-level legal battles in recent years. What is card steering, and how should merchants approach this practice?

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Acceptance of credit card payments helps merchants attract more customers and generate higher sales, especially in e-commerce environments where cash payments aren’t viable.

Unfortunately, there are some downsides to credit card payments, such as the risk of chargebacks and the high cost of interchange fees. 

Interchange fees can run anywhere from 1.3% to 3.25% of the transaction amount, depending on which card brand is involved. Retailers usually factor their average interchange charges into their pricing models, but utilities and government agencies whose prices are regulated are often forced to charge additional convenience fees to cover their costs. 

One thing merchants can do to minimize card acceptance costs is to incentivize the use of cards with lower interchange rates. This practice provides clear benefits for merchants and consumers, but it has been subjected to legal pushback from American Express (whose interchange rates, not surprisingly, are among the highest) in recent years. 

How is Card Steering Defined? 

“Card steering” refers to the practice of offering incentives such as discounts or rewards to consumers who use certain card brands to make their purchases. An example would be a retailer giving customers a discount voucher when they pay with a Visa card. 

Merchants can use card steering to avoid payments from card brands that charge higher interchange rates. Many consumers have multiple credit cards, and may be perfectly happy to choose one card over another if they obtain some sort of benefit from doing so.

Steering options can be offered at the point of sale, giving consumers an opportunity to view their potential rewards and make a last-minute decision to switch payment methods.

Card steering is a win/win for merchants and consumers, but it can negatively affect card brands that charge rates on the higher side.

Card steering can be especially beneficial for merchants who sell expensive merchandise. While they may be defraying their processing costs through their pricing structure, a single high-ticket purchase on a card with high interchange rates can be disproportionately costly. 

What’s the Difference between Card Steering and Transaction Routing? 

Transaction routing is another way for merchants to lower their payment processing costs, but it typically involves debit cards and works very differently from card steering. 

Like card steering, transaction routing has had a contentious legal history. Following the reforms mandated by the 2010 Durbin Amendment of the Dodd-Frank Act, debit cards are required to offer at least two unaffiliated networks for transaction processing. This means that there are always various ways in which debit card transactions can be negotiated, and some of them will cost less than others. 

Transaction routing uses smart technology on the back end to process debit payments in the most cost-effective manner for the merchant. Many payment processors will offer “least cost routing” as a service to their clients, promising to optimize transaction routing to help merchants save money. 

What is the Legal History of Card Steering? 

Up until 2011, the major card networks did not allow merchants to engage in card steering practices. That changed after Visa and Mastercard settled an antitrust suit brought by the U.S. Department of Justice. 

Following the settlement, Visa and Mastercard were no longer able to prevent merchants from offering card steering incentives to their customers. American Express was also involved in the original suit, but they were not part of the settlement. A 2015 ruling barred them from prohibiting card steering, but they appealed that decision the next year and succeeded in getting it overturned. However, that was not the end of the legal battle. 


An antitrust case brought by the Attorney General of Ohio and backed by sixteen other states went all the way up to the Supreme Court in 2018, which ruled in favor of American Express and upheld their right to forbid merchants who accept their cards from engaging in card steering. 

Another antitrust suit, filed by a group of merchants, claimed that American Express’s anti-steering rules were causing harm by discouraging other card networks from offering lower rates.

Once again, American Express came out victorious, with the Second Circuit Appeals Court affirming in 2021 that because the higher rates from other networks were a secondary effect of American Express’s rules, the case did not meet the standards for antitrust litigation. 

How Should Merchants Approach Card Steering Practices? 

Card-steering is only an option for merchants who don’t want to accept American Express cards. Following the various court rulings, American Express is allowed to include a clause in their merchant agreement that prohibits merchants from offering card steering incentives. 

Visa, Mastercard, and Discover do allow card steering, so if you aren’t worried about being able to accept American Express, there are several different incentives you can offer.

For instance: an immediate discount on the purchase price, a coupon for a discount on future purchases, bonus reward points for your loyalty program, or a lower rate on any convenience fees you charge for credit card payments. 


It’s always a good idea for merchants to look for ways to reduce their costs and pass savings on to their customers in the form of lower prices. Card steering may be useful for some merchants, but many industries, such as travel and entertainment, see a high transaction volume from American Express.

If that’s the case for your business, card steering is not a good option, as it would violate your merchant agreement with American Express and cost you your ability to accept their cards. 

While the fight over card steering may yet continue, American Express’s intransigence has made it less viable for now, as there is less competitive pressure for other card networks to lower their rates. 

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