Visa and Mastercard have reached a new settlement with merchants in the “swipe fee” lawsuit that has been working its way through the court system for 20 years.
This third proposed settlement would see Visa and Mastercard lower swipe fees — also known as interchange fees, which currently average around 2.35% — by 0.1 percentage point for five years. Standard consumer rates would be capped for eight years at 1.25%, a more than 25% reduction.
Visa and Mastercard also have agreed to end their “honor all cards” rule, allowing merchants the right to decline some higher-cost Visa and Mastercard-branded credit cards and add surcharges for accepting some cards. The new settlement also calls for a $21 million “merchant education program” to inform merchants about payment acceptance and cost management.
Visa touted the settlement for providing merchants of all sizes with meaningful relief, more flexibility and options to control how customers pay them, while Mastercard said smaller merchants in particular would benefit from more flexibility, lower costs and simpler rules, according to CNBC.
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NRF: New Settlement is ‘All Window Dressing and No Substance’
Despite the new terms, both the Merchants Payments Coalition (MPC) and the National Retail Federation (NRF) have again called for the settlement to be rejected.
“This is the third attempt to settle this case, and the card industry either just doesn’t get it or just doesn’t care,” said NRF’s Chief Administrative Officer and General Counsel Stephanie Martz in a statement. “Once again, this proposal is all window dressing and no substance. The reduction in swipe fees doesn’t begin to go far enough, and the change in the ‘honor all cards’ rule would accomplish nothing. If the courts can’t fix this, it’s time for Congress to take action.”
The lawsuit was first filed in 2005, and an initial settlement was overturned in 2016. Then in 2024, a second $30 billion proposed settlement was rejected by U.S. District Judge Margo Brodie as inadequate.
Merchants Put Their Hopes in Congress
Swipe fees are one of merchants’ highest operating costs, after labor. Swipe fees for Visa and Mastercard credit cards alone have more than quadrupled since 2010, reaching $111.2 billion last year, with total credit and debit card swipe fees hitting a record $187.2 billion, according to MPC, which estimates that the pass-along cost to the average family is nearly $1,200 a year.
“Achieving a settlement that works to reverse current illegal and anticompetitive practices of Visa and Mastercard should be straightforward, but this attempt fails once again and should be rejected,” said Jennifer Hatcher, MPC Executive Committee member and Chief Public Policy Officer of the Food Industry Association in a statement. “The courts have emphatically rejected these settlements twice, but now the card industry is trying again to get legal protection while offering little in return to merchants. Under this proposal, Visa and Mastercard would get to keep fixing swipe fees while Main Street businesses and customers would pay the price.”
Hatcher called the proposed fee reduction “miniscule” and pointed out that because it only applies to interchange — the portion of swipe fees that goes to card-issuing banks — Visa and Mastercard would still be able to raise their own fees without any limits.
“This makes a mockery of Judge Brodie’s admonition in her rejection of the previous settlement, that any new settlement must deal with the ‘honor all cards ‘rule,” Hatcher said. “It ignores the fact that 85% of cards issued today are rewards cards and that merchants have no choice but to accept them. Banks would likely also have the power to move cards into different categories, effectively forcing merchants to continue to take all cards and pay their high prices.”
Both MPC and NRF continued their calls for Congress to pass the Credit Card Competition Act, which would require banks to enable cards to be processed over at least one unaffiliated network like Star, NYCE or Shazam in addition to Visa or Mastercard. NRF estimated that this change would result in increased competition that could save merchants and consumers as much as $17 billion a year.
