Visa, Mastercard Reach $38 Billion Settlement Over Swipe Fees Amid Merchant Opposition

Visa and Mastercard have announced a revised $38 billion settlement to resolve longstanding litigation over swipe fees, marking a significant shift in their ongoing legal battle with U.S. merchants. The deal, which addresses claims that the card networks violated antitrust laws by charging excessive fees to process credit card payments, comes after a previous $30 billion settlement was rejected by a judge for being inadequate.

The settlement aims to reduce swipe fees over the next five years. Starting with a 0.1% reduction in fees, it includes caps on certain charges and allows merchants more flexibility in choosing the types of cards they will accept. However, the deal has been met with resistance from merchant groups who argue that it still falls short in addressing the underlying issues.

Key Terms of the Settlement

Under the terms of the revised agreement, Visa and Mastercard will reduce swipe fees, which in 2024 averaged 2.35%, by 0.1 percentage point over five years. This change applies to all U.S. credit cards, including premium rewards cards, which merchants have long criticized for higher fees. In addition, a cap will be placed on standard consumer card fees at 1.25% for eight years, offering a more than 25% reduction.

Merchants will also gain increased flexibility to impose surcharges for card payments, including a new ability to charge up to 3% for credit card transactions. However, the settlement has not removed the “Honor All Cards” rule, which requires businesses to accept all Visa and Mastercard credit cards or none, a point of contention for many merchants.

Opposition From Merchant Groups

The revised settlement has drawn strong opposition from several major merchant associations, including the National Retail Federation (NRF), which argues that it does not go far enough to address the real cost of swipe fees. They argue that the deal still leaves businesses facing high costs, particularly when it comes to popular rewards cards.

“You can’t just suddenly tell more than 80% of your card customers you’re not going to take their cards,” said Stephanie Martz, the NRF’s general counsel. “You would lose a lot of business.”

Furthermore, the NRF notes that swipe fees, or interchange fees, amounted to $111.2 billion in the U.S. in 2024, up from $100.8 billion in 2023, highlighting the growing financial burden on merchants.

Support and Benefits for Small Merchants

Visa and Mastercard argue that the settlement offers meaningful relief, especially for smaller merchants. According to the card networks, the new fee reductions and added flexibility will help businesses of all sizes, especially those struggling with high costs associated with processing credit card payments.

Economists hired by the merchants have estimated that the settlement could save businesses $38 billion by 2031, while unlocking $224 billion in additional benefits to consumers through increased competition and a more efficient payments system.

Despite these claims, some opponents argue that the settlement doesn’t provide enough incentives to reduce the fees that banks charge, giving Visa and Mastercard more room to increase their own rates.

A Prolonged Legal Battle

The settlement ends over two decades of litigation dating back to accusations that Visa, Mastercard, and banks colluded to raise processing fees in violation of U.S. antitrust laws. The lawsuit, which began in 2005, has already seen multiple revisions, with the initial $30 billion settlement being rejected in June by U.S. District Judge Margo Brodie.

Judge Brodie criticized the $30 billion deal for offering only marginal savings to merchants, saying it failed to address the broader issue of high fees and left the status quo largely intact.

Moving Forward

While Visa and Mastercard have agreed to the settlement without admitting any wrongdoing, the deal is still subject to approval by Judge Brodie. Merchant groups remain vocal in their opposition, and it remains to be seen whether this revised agreement will satisfy their concerns.

In the meantime, both sides are closely monitoring the potential impact on the broader payments industry, with the settlement set to reshape the way credit card fees are structured in the coming years.