Credit card rewards under attack: why premium fees rise
Interchange fees are back in the crosshairs, and that matters for anyone carrying a premium card. The settlement pressure, state legislation, and a renewed Senate push could all trim the revenue stream that helps fund rewards, while issuers’ own costs keep climbing.
That squeeze lands on a business that is already tight. Premium cards for affluent consumers generate nearly $1,750 in revenue per account per year, but points and lifestyle credits consume more than 60% of that, and once sign-up bonuses, operations, and funding costs are added in, net income falls under $200 per account per year, according to Flagship Advisory Partners in May 2026.
Why credit card rewards may cost more
The fee side of premium cards has been moving for years. Flagship Advisory Partners noted last month that the American Express Platinum annual fee has doubled from $450 to $895 over the last decade, a neat little reminder that “free” travel perks usually have a bill attached somewhere.
The perk stack has changed too. Instead of one big travel rebate, Flagship Advisory Partners described a coupon-book model built around credits tied to brands such as Resy, lululemon, Uber, Apple, StubHub, DoorDash, Peloton, and Equinox, with quarterly or semi-annual reset dates.
That structure can make a card look richer than it is. Chase advertises more than $3,000 in annual value on the Sapphire Reserve, Flagship Advisory Partners noted in May, but that headline value depends on credits being used, remembered, and fit into a cardholder’s routine.
Lounge networks tell the same story. Travelers at JFK or LAS can now pass an American Express Centurion Lounge, a Chase Sapphire Lounge, and a Capital One Lounge in sequence, Flagship Advisory Partners reported last month, while American Express has added speakeasy-style Sidecar lounges and Capital One is rolling out restaurant-style Landing locations.
Issuers are also making some benefits conditional. The Sapphire Reserve unlocks IHG Diamond Elite status and a $500 Southwest credit at $75,000 in annual spend, and U.S. Bank links a 4% cashback rate to $100,000 or more in deposits, which helped the bank attract $28 billion in additional deposits over the last year, Flagship Advisory Partners said last month.
That is the part of the premium-card story that often gets lost. The products are not just getting pricier, they are getting more conditional. Spend more, park more money, remember more credits, and maybe the math works.
Interchange fee pressure is building
The revenue side is under legal and legislative pressure at the same time. In April, CardTraq reported that the amended Visa/Mastercard settlement proposed a 10 basis point reduction in the combined average effective credit interchange rate for five years, plus a 1.25% cap on standard consumer cards for eight years.
The settlement would also expand merchant rights to decline premium and commercial card types. CardTraq said it is awaiting court approval in the Eastern District of New York, with implementation potentially beginning in fiscal 2027 if approved.
State laws are adding another layer. CardTraq reported in April that the Illinois Interchange Fee Prohibition Act was largely upheld in February 2026 and bars interchange on the tax and gratuity portions of transactions.
On a $50 check in Chicago with $4.08 in tax and an $8 tip, roughly 24% of the transaction value drops out of the interchange calculation, CardTraq noted. Nearly a dozen other states have introduced similar measures.
The federal front is stirring too. View From the Wing reported this month that Senators Dick Durbin and Roger Marshall are pushing legislation to cap credit card interchange, reviving the logic behind Durbin’s debit-card fight during the Great Recession.
That earlier policy, according to View From the Wing reported this month, eliminated debit card rewards and raised checking-account costs. It is a familiar warning, even if the credit-card version is still being argued over.
Network fees are rising too
Interchange is not the only cost problem. CardTraq reported in April that network fee unit costs across its global client base rose roughly 30% over five years, well above transaction volume growth over the same period.
The major networks have been posting growth too. Visa’s fiscal Q1 2026 data processing revenue rose 17% on 9% transaction growth, while Mastercard’s payment network revenue increased 12% against 7% gross dollar volume growth, CardTraq said.
The Reserve Bank of Australia added a blunt assessment in March 2026, concluding that scheme fees, especially for credit cards, “are not subject to effective competitive constraints,” according to CardTraq.
New fee lines are multiplying as tokenization and digital payments spread. Visa introduced Card Present Token Fees on contactless transactions in April 2026, and Mastercard launched Fallback Avoidance and Force Post Transaction Fees in January 2026, with another increase to its Undefined Authorization Fee already announced for January 2027, CardTraq reported.
For issuers, that creates a hard double bind. Revenue on one side is under pressure, while costs on the other keep creeping up.
Why issuers still want affluent cardholders
That does not mean premium cards are going away. Flagship Advisory Partners reported last month that high-end cardholders now account for 85% of U.S. credit card spending, up from 81% in 2019, and that this group has driven all purchase volume growth since the pandemic.
They also spend six times more than typical consumers and default at less than 1%, Flagship Advisory Partners said. For issuers, that is the kind of customer profile that makes thin card margins easier to tolerate.
The real prize is the relationship beyond the card. Flagship Advisory Partners estimated last month that a single cross-sold product, such as a mortgage, a brokerage account, or a wealth management relationship, can generate 25 to 50 times the annual contribution of the card itself.
Robinhood is a case study in the same logic. Flagship Advisory Partners estimated in May that the Robinhood Gold Card’s 3% unlimited cashback generates no more than $140 per cardholder before operating expenses over the last twelve months, but that Gold subscribers hold five times more assets under management and paid Robinhood $656 million in margin interest over the same period.
That is why the likely response to pressure is not a retreat from premium cards. It is a narrower, more conditional product, with more spend thresholds, more deposit requirements, and more benefits tied to specific partners.
The fight over who pays
The fairness debate around rewards cards is not settled, despite the tidy slogans on both sides. A 2026 preprint found that interchange fees transfer about $30 billion a year from cash and debit users to credit users, but that merchant surcharging reduces that by only $1 to $2 billion, and that the regressivity finding at the transaction level is fragile, the paper said in May 2026.
The same preprint also found that the transfer between major income groups is just $9.2 billion per year, from households below $150,000 in income to households above $150,000. Much of the action is happening within income classes, which makes the political slogan sound a bit too clean for comfort.
View From the Wing reported this month that the distributional debate is more complicated than the usual “poor subsidize rich” line suggests, especially once merchant behavior and cross-subsidies are taken into account.
That does not mean the regulatory push will stop. It does mean the politics are messier than the slogans.
For cardholders, the near-term change is likely to show up quietly, in annual-fee increases, richer-looking but more restrictive benefit packages, and thresholds that turn premium cards into something closer to club memberships. The cards will still be there. They’ll just ask more from the people holding them.