TLDR
- Visa and Mastercard proposed a revised settlement to reduce swipe fees by 0.1 percentage points for five years after a judge rejected their previous $30 billion agreement
- Merchants will be able to choose which card categories to accept, including commercial cards, premium rewards cards, and standard consumer cards
- Standard consumer card rates will be capped at 1.25% for eight years, down from the current 2% to 2.5% range
- Swipe fees totaled $111.2 billion in the United States in 2024, up from $100.8 billion in 2023 and four times higher than 2009 levels
- Merchant groups are already opposing the new settlement, calling the fee reduction “minuscule” and saying businesses cannot refuse most rewards cards
Visa and Mastercard have announced a revised settlement agreement with merchants following a federal judge’s rejection of their previous $30 billion deal. The new agreement aims to end 20 years of litigation over swipe fees.
U.S. District Judge Margo Brodie rejected the original settlement in June 2024. She called the $6 billion in annual savings for merchants “paltry” compared to what the card networks could still charge.
The litigation began when businesses accused Visa, Mastercard and banks of violating antitrust laws. Merchants claimed the companies conspired to charge excessive fees for processing credit card transactions.
Under the new settlement terms, swipe fees will be reduced by 0.1 percentage points for five years. Current swipe fees typically range from 2% to 2.5% of each transaction.
The settlement introduces new flexibility for merchants. Businesses will be able to choose which card categories to accept from Visa and Mastercard.
These categories include commercial cards, premium consumer cards, and standard consumer cards. Many popular rewards cards fall under the premium consumer category.
New Rate Caps and Merchant Options
Standard consumer card rates will be capped at 1.25% for eight years. Merchants will also receive more options to impose surcharges when customers pay with credit cards.
Visa stated the settlement provides merchants of all sizes with relief and flexibility. The San Francisco-based company said merchants would gain more control over how customers pay them.
Mastercard echoed similar sentiments about the agreement. The Purchase, New York-based company said smaller merchants would benefit from lower costs and simpler rules.
Neither Visa nor Mastercard admitted wrongdoing in the settlement. Their stock prices rose less than 1% in early morning trading following the announcement.
Swipe fees reached $111.2 billion in the United States in 2024. This represents an increase from $100.8 billion in 2023 according to the National Retail Federation.
The 2024 total is four times higher than swipe fee levels in 2009. The National Retail Federation is the largest U.S. retail trade group.
Merchant Groups Express Opposition
The settlement faces opposition from merchant organizations. Doug Kantor, general counsel of the National Association of Convenience Stores, said the deal does not incentivize banks to lower their rates.
Kantor stated merchants cannot simply refuse rewards cards. These cards account for more than 80% of all credit cards in circulation.
The Merchants Payments Coalition called the fee reduction “minuscule.” The group said Visa and Mastercard would remain free to raise fees without restrictions once temporary cuts expire.
Merchants have long complained about the “Honor All Cards” rule. This rule requires businesses to accept all Visa and Mastercard cards or none at all.
The previous settlement would have reduced swipe fees by 0.07 percentage points over five years. Judge Brodie found this reduction insufficient when she rejected the deal.
The new settlement requires approval from Judge Brodie. The agreement must go through the court approval process before taking effect.
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