The revised Visa and Mastercard settlement with retailers addresses high credit card processing fees by allowing lower swipe fees, greater flexibility in card acceptance, and surcharging options. This agreement, reached after a rejected $30 billion deal, aims to resolve two decades of antitrust litigation while providing merchants with modest relief starting potentially in late 2026.
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Lower swipe fees: The deal caps average interchange rates at a 10-basis-point reduction for U.S. consumer and commercial credit transactions over five years.
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More merchant flexibility in distinguishing between standard and premium cards, though not between issuers at the same level.
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Surcharging provisions limited to 1.25% for standard consumer rates, offering retailers new ways to manage costs amid $111.2 billion in 2024 swipe fees.
Visa and Mastercard’s revised settlement cuts swipe fees and boosts merchant flexibility amid antitrust disputes. Discover how this impacts retailers and payments in 2025—explore key changes now.
What is the Visa and Mastercard settlement on credit card fees?
Visa and Mastercard settlement refers to a revised agreement with U.S. retailers to resolve long-standing disputes over excessive credit card processing fees, known as swipe fees. Reached after a federal judge rejected a prior $30 billion deal, it provides for modest fee reductions, enhanced merchant choice in card acceptance, and surcharging capabilities. This aims to end over 20 years of litigation accusing the networks of antitrust violations.
How does the settlement provide more flexibility for merchants?
The agreement allows retailers to independently decide on accepting commercial and consumer credit cards, separating standard from premium consumer options to better manage costs. According to the U.S. Securities and Exchange Commission report, this flexibility stops short of permitting distinctions between cards from different issuers at the same tier. Supporting data from the U.S. National Retail Federation shows swipe fees reached $111.2 billion in 2024, highlighting the need for such reforms. Visa stated the deal offers “meaningful relief and options” for businesses, while Mastercard emphasized improved experiences for smaller retailers through lower prices and simpler rules.
Additionally, the networks commit to a 10-basis-point reduction in average system-wide interchange rates for U.S.-issued consumer and commercial credit transactions at U.S. merchants, capped for five years. This applies to specific programs under the Mastercard brand. The settlement introduces direct surcharging methods for credit transactions, replacing 2012 standards while maintaining consumer protections and market openness. Standard consumer surcharges are capped at 1.25% through the agreement’s term, giving merchants tools to offset high fees that quadrupled since 2009.
Neither Visa nor Mastercard admitted wrongdoing in the plaintiffs’ antitrust claims. Implementation of rule changes awaits court approval, expected in late 2026 or early 2027, demonstrating a structured approach to balancing merchant needs with network operations.
The settlement builds on years of merchant frustration with swipe fees that fund card rewards but burden retailers. Experts from the Merchants Payments Coalition have long criticized these costs, noting rewards cards comprise 85% of issued cards, leaving little choice for businesses. This deal, while incremental, signals potential shifts in payment processing dynamics.
Frequently Asked Questions
What led to the rejection of the original $30 billion Visa and Mastercard settlement?
U.S. District Judge Margo Brodie in Brooklyn rejected the $30 billion accord in June 2024, deeming the proposed 0.07 percentage point swipe fee reduction over five years insufficient. She highlighted that annual savings of $6 billion for retailers remained “paltry” compared to ongoing high charges, and criticized mandates like “Honor All Cards” that force acceptance of all network cards without exception.
How will the Credit Card Competition Act relate to this Visa and Mastercard settlement?
The Credit Card Competition Act, under congressional consideration, seeks to introduce more competition into credit card processing, potentially amplifying the settlement’s effects by challenging Visa and Mastercard dominance. This legislation could encourage alternative networks, reducing reliance on high swipe fees and benefiting merchants beyond the agreement’s temporary caps. It addresses ongoing concerns about anti-steering rules that limit guidance toward cheaper payment options.
Key Takeaways
- Fee reductions: A 10-basis-point cap on interchange rates for five years provides targeted relief on $111.2 billion in annual swipe fees.
- Merchant autonomy: Retailers gain options to differentiate card types and apply surcharges up to 1.25%, easing cost burdens without admitting network liability.
- Future implementation: Pending court approval, changes start in 2026, urging businesses to prepare for adjusted payment strategies amid legislative pushes like the Credit Card Competition Act.
Conclusion
The Visa and Mastercard settlement marks a pivotal, if modest, step in addressing credit card processing fees that have plagued retailers for decades, incorporating flexibility and surcharging while capping interchange rates. As swipe fees continue to rise—reaching $111.2 billion in 2024 per the U.S. National Retail Federation—this agreement offers practical tools for cost management. Looking ahead, approval by Judge Brodie could usher in fairer practices, and with bills like the Credit Card Competition Act in play, merchants may see broader competition, encouraging innovation in payments for businesses of all sizes.
