Visa and Mastercard have announced a proposed settlement aimed at reducing the fees that merchants incur whenever customers use their credit cards. These fees, referred to as swipe fees or interchange fees, typically range from 2% to 2.5% of each transaction, and are generally passed on to consumers through higher costs for goods and services. As a result, these fees have been a significant contributor to inflationary pressures on American households.
Under the terms of the proposed agreement, which seeks to conclude two decades of legal disputes, both companies plan to lower the interchange fees that merchants pay by approximately one-tenth of a percent over the next five years. This adjustment means that for most US credit card purchases, merchants will pay 0.1% less per transaction. While this change has the potential to save retailers money over millions of purchases, it has sparked criticism over its sufficiency.
The National Retail Federation (NRF) has been a vocal opponent of current swipe fees, arguing they are among the highest operating expenses for retailers. According to the NRF, these fees have been inflating consumer prices by over $1,200 annually for the average American family. Stephanie Martz, the NRF’s chief administrative officer and general counsel, criticized the settlement, stating that the proposed reduction is minimal compared to the 2.35% average swipe fee projected for 2024. She emphasized that this fee has multiplied threefold since 2010, averaging 2.26% in 2023, and called for the settlement to be rejected as it only rolls back fees equivalent to about one year.
Similarly, the National Association of Convenience Stores (NACS) echoed the NRF’s concerns, asserting that the settlement is unlikely to provide any real benefits to merchants and consumers. They expressed concern that it could grant legal immunity to the credit card companies, allowing them to potentially raise fees or engage in anti-competitive practices.
In response, Mastercard characterized the settlement as a “best resolution for all parties,” claiming it delivers necessary clarity, flexibility, and consumer protections. The company highlighted that it would improve acceptance choices for smaller merchants, reduce costs, and simplify operational rules, enabling a better payment experience for various business sizes.
Visa also expressed support for the proposed settlement, indicating that it would afford meaningful relief and more options for merchants regarding payment acceptance.
Additionally, the settlement would relax restrictions that require merchants to accept all cards issued by the networks if they accept any of them. This means that businesses could selectively accept different types of consumer or business cards, although they would still be unable to discriminate based on the issuing bank.
Before the settlement can take effect, it requires approval from a federal judge in the Eastern District of New York. If approved, the changes to the fee structure and card acceptance rules will not be implemented until sometime in late 2026 or early 2027, concluding the longstanding litigation against Mastercard and Visa that began in 2005. Neither company has admitted to any wrongdoing in connection with the ongoing lawsuits.
