Visa and Mastercard Settle Merchant Fee Dispute
Visa and Mastercard are moving forward with a revised settlement after a judge deemed an earlier $30 billion agreement insufficient. This new arrangement comes in response to long-standing accusations from merchants who claim that these companies charge excessively high fees for credit card processing.
The settlement marks the end of a 20-year legal battle that centered on allegations of collusion to violate U.S. antitrust laws, particularly regarding “swipe fees” which networks impose for transaction processing.
Pending court approval, the agreement stipulates that Visa and Mastercard will reduce their swipe fees—a percentage ranging from 2% to 2.5%—by 0.1 percentage points over the next five years.
Moreover, merchants will have the option to decide if they want to accept various types of U.S. cards, such as commercial cards and popular rewards cards. In addition, interest rates on standard consumer cards will be capped at 1.25% until the settlement concludes, while retailers will gain more flexibility to impose extra fees for credit card payments.
According to the National Retail Federation, swipe fees, or interchange fees, reached $111.2 billion in the U.S. in 2024. This represents a notable increase from $100.8 billion in 2023 and is four times higher than the amount in 2009.
Visa claims the settlement offers “meaningful relief” and greater flexibility for merchants of all sizes to manage how they receive customer payments. Mastercard echoed those sentiments, suggesting that particularly small merchants would gain from reduced costs and simpler rules, enhancing the overall payment experience for businesses and consumers alike.
However, both companies have not admitted to any wrongdoing as part of the settlement.
Potential Merchant Opposition
The settlement awaits approval from U.S. District Judge Margo Brody in Brooklyn, who had previously rejected the $30 billion proposal in June 2024.
This new agreement aims to lower swipe fees by about 0.07 percentage points over five years, while also providing merchants with more options to levy additional fees. Nonetheless, the judge indicated that the fees remain quite high and suggested that the estimated $6 billion in annual savings for merchants was modest relative to potential future fees imposed by Visa and Mastercard.
Furthermore, the judge criticized the settlement for mandating an “Honor All Cards” rule, requiring merchants to accept all categories of Visa and Mastercard cards or none at all. Merchants have long expressed concerns over anti-steering rules that hinder them from directing customers toward cheaper payment alternatives.
In light of this backdrop, some merchants and industry groups are likely to challenge the settlement. The Merchant Payments Union, for instance, labeled the fee reductions as “minimal” and stressed that Visa and Mastercard would remain free to raise fees once the temporary reductions conclude.
They also pointed out that merchants face pressure to accept loyalty cards, which constitute 85% of all issued cards, with banks potentially able to reclassify cards, which may force merchants to accept all card types.
