Visa and Mastercard have unveiled an updated agreement with merchants who alleged excessive charges by the credit card networks, following a previous $30 billion settlement that was rejected by a judge. This new deal, subject to court approval, marks the conclusion of a two-decade legal battle over antitrust violations involving swipe fees.
Under the terms of the settlement, Visa and Mastercard will reduce swipe fees by 0.1 percentage points for five years from the current range of two to 2.5 percent. Merchants will have the option to accept specific categories of U.S. cards, including commercial, premium consumer, and standard consumer cards, with the latter capped at 1.25 percent until the agreement’s expiration. Additionally, merchants will gain more freedom to levy surcharges on credit card payments.
In 2024, interchange fees, commonly known as swipe fees, in the U.S. amounted to $111.2 billion, a steady increase from previous years. Visa emphasized that the settlement will offer “meaningful relief” and greater flexibility to merchants of all sizes, while Mastercard highlighted the benefits of reduced costs and simpler regulations, aiming to enhance the payment experience for businesses and consumers.
Critics of the settlement have argued that it fails to incentivize banks to lower their rates and allows Visa and Mastercard to potentially increase fees without constraints. The previous $30 billion agreement was rejected due to concerns about elevated fees and the imposition of the “Honor All Cards” rule, which mandates acceptance of all Visa and Mastercard cards.
Moreover, the settlement follows a similar resolution in Canada in 2023, where interchange fees were limited to 0.95 percent on average, saving retailers an estimated $1 billion over five years. However, some small business owners criticized the deal for its limitations on savings for smaller enterprises. Additionally, a 2022 class action settlement in Canada enabled businesses to pass on credit card fees to customers through a clear surcharge mechanism, capped at 2.4 percent, with Visa and Mastercard agreeing to reimburse companies for past swipe fees.