Visa and Mastercard have unveiled an updated settlement with merchants who had accused the card networks of imposing excessive charges for accepting their credit cards. This new agreement comes after a previous $30 billion deal was dismissed by a judge for being insufficient.
The settlement, subject to court approval, marks the culmination of two decades of legal battles where businesses alleged that Visa, Mastercard, and banks colluded to violate U.S. antitrust laws by imposing “swipe fees” on transactions. As per the terms, Visa and Mastercard will reduce swipe fees, typically ranging from two percent to 2.5 percent, by 0.1 percentage points over a five-year period.
Under the agreement, merchants will have the option to decide whether to accept certain U.S. cards in specific categories, such as commercial cards, premium consumer cards (including popular rewards cards), and standard consumer cards. The cap for standard consumer rates will be set at 1.25 percent until the agreement expires, and merchants will gain more flexibility to apply surcharges for credit card payments.
Swipe fees, also known as interchange fees, amounted to $111.2 billion in the U.S. in 2024, a significant increase from $100.8 billion in 2023 and four times higher than the level recorded in 2009, according to the National Retail Federation.
Visa emphasized that the settlement offers “meaningful relief, more flexibility, and options” for merchants of all sizes. Similarly, Mastercard highlighted that smaller merchants stand to benefit from increased flexibility, reduced costs, and simplified rules, ultimately leading to an enhanced payment experience for businesses and consumers.
It is worth noting that neither Visa nor Mastercard admitted any wrongdoing in reaching the settlement. This development follows the rejection of a $30 billion agreement by U.S. District Judge Margo Brodie in June 2024, who criticized the previous deal for not adequately addressing the issue of elevated fees and allowing Visa and Mastercard to maintain relatively high charges.
Additionally, merchants have long raised concerns about Visa and Mastercard’s enforcement of “anti-steering” rules that restrict businesses from guiding customers towards cheaper payment methods. The settlement in the U.S. follows a similar resolution in Canada in 2023, where the government reached a deal with Visa and Mastercard to cap interchange fees at an average of 0.95 percent, resulting in anticipated savings for retailers.
Furthermore, a class action lawsuit settlement in 2022 between Canadian businesses and the card companies paved the way for businesses to pass on fees to customers through a surcharge, capped at 2.4 percent, with clear disclosure requirements. This settlement also entailed Visa and Mastercard reimbursing companies for years of swipe fees.