A district judge in the U.S. has given a preliminary nod to a $38 billion settlement involving Visa and MasterCard, addressing claims from merchants who argue that the card networks charge too much in processing fees. While this isn’t the final word yet, it’s certainly another chapter in a lengthy legal saga stretching back over 20 years.
Previously, a $30 billion settlement was turned down by a different court two years ago.
This dispute revolves around the so-called “swipe fees” that merchants incur when customers use credit cards. A class action lawsuit initiated in 2005 by over 12 million merchants accused Visa and MasterCard of imposing excessive fees. In 2025, merchants faced about $119 billion in swipe fees from the credit card companies.
Many smaller and midsize businesses often absorb these costs, pass them along to customers with added fees of 3% to 4%, or offer discounts for cash transactions.
If the settlement eventually gains final approval, what impact will it have on consumers?
Reduction of Merchant Fees
As part of this settlement, Visa and MasterCard have pledged to reduce swipe fees (or interchange fees) by 0.1 percentage points over the next five years. They also capped standard consumer card fees at 1.25% for an eight-year period. Last year, the average fees merchants paid were around 2.35%.
However, it’s still uncertain whether these savings will actually trickle down to consumers.
Potential Impact on Reward Cards
If the settlement gets the green light, some popular loyalty cards may be affected in significant ways.
The current “honor all cards” rule, which mandates that merchants accept all versions of Visa and MasterCard, will be removed. As a result, merchants might choose to decline high-value loyalty cards or other premium consumer and commercial credit cards.
Still, large retailers argue that these cards are too popular among customers to reject outright.
Merchants May Impose Additional Fees
The settlement also allows merchants to pass extra processing fees to customers on specific high-value cards or offer discounts for using cards with lower swipe fees.
Resistance from Some Retailers
The two-decade-long legal battle isn’t over yet. The National Retail Federation expressed disappointment with the judge’s tentative approval of the settlement.
Their statement emphasized that the proposed settlement fails to provide any real relief and maintains the existing systems that allow Visa and MasterCard to dictate the fees that merchants and consumers face.
They added that they look forward to engaging in the next phase of the litigation.
