Visa and Mastercard presented a revised $38 billion settlement with retailers who claimed the card networks charged too much to accept their credit cards in an attempt to appease a judge who rejected a lesser settlement as insufficient.
Businesses accused Visa, Mastercard, and banks of collaborating to breach U.S. antitrust laws, notably through the card networks’ collection of “swipe fees.” The settlement reached on Monday would put an end to 20 years of litigation.
However, merchant associations opposed the agreement, claiming it ignored issues raised by U.S. District Judge Margo Brodie, whose approval is necessary, when she rejected a $30 billion settlement in June 2024.
Cap for Fees
Swipe fees, which normally range from 2% to 2.5% and averaged 2.35% in 2024, will be reduced by 0.1 percentage points for five years by Visa and Mastercard as part of the settlement.
In certain categories, such as commercial cards, premium consumer cards (which include many rewards cards), and ordinary consumer cards, merchants would have the option of accepting U.S. cards.
For eight years, standard consumer rates would be set at 1.25%, a decrease of more than 25%.
According to a court document, merchants would also have more choices to apply fees when customers pay with cards, including an “unfettered” power to charge up to 3%.
Visa finds the settlement offers to offer significant relief to businesses of all sizes. Mastercard also believes that it would benefit the merchants. These developments arrive during a period of heightened market sensitivity, where broader economic uncertainty has made businesses even more attentive to shifts in structural costs and pricing power.
Swipe fees, which normally range from 2% to 2.5% and averaged 2.35% in 2024, will be reduced by 0.1 percentage points for five years by Visa and Mastercard as part of the Visa-Mastercard swipe fee settlement.
In certain categories, such as commercial cards, premium consumer cards (which include many rewards cards), and ordinary consumer cards, merchants would have the option of accepting U.S. cards.
For eight years, standard consumer rates would be set at 1.25%, a decrease of more than 25%.
Limiting the upward spiral in swipe fees could save retailers $38 billion by 2031, according to two economists recruited by the merchant plaintiffs, Keith Leffler and Nobel Prize-winning economist Joseph Stiglitz.
Judge Previously Criticized Proposed Payout as ‘Paltry’
The $30 billion settlement would have allowed shops to levy surcharges and reduced swipe costs by around 0.07 percentage points over a five-year period.
However, Brodie rejected the agreement, claiming that rates would stay higher than they would have been in the absence of the antitrust infractions and that the $6 billion in yearly savings for retailers was “paltry” in comparison to what Visa and Mastercard could still charge.
She also criticized the agreement for enforcing the “Honor All Cards” rule, which mandates that businesses accept all Visa and Mastercard cards or none at all.
The settlement, according to the merchant plaintiffs, resolves that issue. Additionally, they have long accused Visa and Mastercard of implementing “anti-steering” regulations that forbid them from pointing clients in the direction of less expensive payment methods.
The dispute mirrors the broader tug-of-war underway across the financial sector, including recent legal battles over data-access fees between major banks and fintech intermediaries
Industry Association Backs Proposed Settlement Deal
The Electronic Payments Coalition, which consists of major issuers like Bank of America, Capital One, Chase, and Citibank, as well as card networks, is one group endorsing the Visa-Mastercard swipe fee settlement.
Executive Chairman Richard Hunt says the agreement would lower swipe costs below those proposed in a Senate bill backed by Republican Roger Marshall of Kansas and Democrat Richard Durbin of Illinois—a bill largely opposed by the banking sector.
In an interview, Hunt asked whether Walmart had reduced any of its prices by more than 25% and maintained the reduction for eight years.
The National Association of Convenience Stores’ general counsel, Doug Kantor, responded that the settlement allows Visa and Mastercard to boost their own rates rather than providing banks with an incentive. This settlement forbids merchants from negotiating and setting pricing with several banks.
Impact on Consumers
While the proposed Visa-Mastercard swipe fee settlement focuses on merchants and the card networks, consumers ultimately sit in the middle of the swipe-fee debate. Retailers have long argued that processing fees inflate everyday prices because businesses bake those costs into the final amount customers pay. If fees rise, shoppers feel it, even if they never see a separate line item.
The settlement’s lower caps could ease some of that pressure, though merchant groups say the relief is too small and too short-lived to meaningfully reduce prices at the checkout counter. Consumers may also encounter more surcharges, as the deal gives retailers wider authority to pass card-payment costs directly to shoppers.
Lower swipe fees often mean less revenue to fund cashback or loyalty perks, putting pressure on card issuers to scale them back over time. Advocates claim that the actual effect of the settlement will be contingent upon whether it leads to real competition in the payments sector or merely confirms the existing system with minor and temporary changes.
The Takeaway
The $38 billion Visa-Mastercard swipe fee settlement is a landmark effort to settle the antitrust wars that have raged for twenty years about how much merchants have to pay for credit card acceptance. Although the plan provides for a temporary cost cap, lower standard rates, and greater merchant flexibility to apply surcharges, the main retail groups contend that it still permits Visa and Mastercard to have too much control over pricing and network rules.
Judge Margo Brodie rejected a smaller settlement in early 2024 because she found it too limited, and her approval remains a crucial obstacle. The banking and payments sectors support the current deal, saying it brings real and lasting relief, while retailers argue it fails to create real competition or meaningful structural reform.
The ultimate decision will determine the setting of payment fees for the coming years and thus will have financial implications for merchants, card issuers, and consumers in the United States.