Whether it’s the annual fee credit-card users have to pay or the processing fees merchants have to cover, credit-card issuers such as Visa and Mastercard are making money in all directions.

And plenty of consumers and businesses think the credit-card issuers’ business model is unfair. Now, after two decades of courtroom battles, Visa and Mastercard have agreed to pay $38 billion to settle claims that the card giants inflated credit-card processing fees charged to merchants.

Major retail groups say the new deal still doesn’t go far enough.

The revised accord, announced Monday, November 10, aims to end years of antitrust litigation and replace a smaller $30 billion deal a federal judge rejected in 2024 as “paltry.”

“Swipe” fees, also known as “interchange” fees, are what merchants pay banks every time a customer swipes a Visa or Mastercard.

These costs, which averaged 2.35% of each transaction last year, added up to a record $111.2 billion in 2024, according to the National Retail Federation (NRF) — four times higher than in 2009.

Under the new agreement, Visa and Mastercard would reduce swipe fees by 0.1 percentage point for five years. Additionally, they would cap the standard interchange rate for consumer credit-card transactions at 1.25% for the next eight years, an estimated 25% reduction compared to previous typical rates, Reuters reported.

Merchants would also gain the right to choose which cards they accept and may add surcharges of up to 3% when customers pay with credit cards.

“This should be viewed favorably [by Visa and Mastercard investors], and is well below expectations. It represents only a slightly bigger rollback than the initial [2024] settlement,” Jefferies analysts said in American Banker.

Visa said the deal provides meaningful relief for merchants of all sizes, while Mastercard said smaller retailers would benefit most.

Visa and Mastercard proposed a settlement of $38 billion over merchant credit-card fees.

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Consumer groups skeptical of proposed settlement

But many trade groups — including the NRF and the Merchants Payments Coalition — oppose the settlement, arguing it doesn’t solve the underlying problem of rising card costs.

“You can’t just suddenly tell more than 80% of your card customers you’re not going to take their cards,” NRF General Counsel Stephanie Martz told Reuters. “You would lose a lot of business.”

“This is the third attempt to settle this case and the card industry either just doesn’t get it or just doesn’t care,” Martz added in an NRF statement.

“Once again, this proposal is all window dressing and no substance. The reduction in swipe fees doesn’t begin to go far enough, and the change in the honor-all-cards rule would accomplish nothing. If the courts can’t fix this, it’s time for Congress to take action.”

U.S. District Judge Margo Brodie of Brooklyn will have to approve the deal. Brodie rejected the earlier $30 billion version last year, saying the proposed relief didn’t match the scale of Visa and Mastercard’s alleged antitrust violations.

Judge Brodie criticized the prior deal for leaving fees “above where they would be absent the violations” and keeping the controversial “Honor All Cards” rule, which forces merchants to either accept every Visa or Mastercard product or none at all.

In her 2024 ruling, Judge Brodie found the proposed settlement “provides limited monetary and injunctive relief when compared to the strength of Plaintiffs’ case and the significant damages alleged.”

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She highlighted that the relief was “unlikely to significantly alter the structure of the payment card industry” and noted that key practices (such as the “Honor All Cards” rule) remained intact, thereby weakening the value of the deal for merchants.

She explicitly stated that the defendants — Visa Inc. and Mastercard Incorporated — “could withstand a substantially greater judgment,” indicating the court believed the settlement was too modest relative to the harm alleged.

The new proposal removes some of those restrictions, allowing merchants to reject higher-cost rewards and commercial cards while still accepting basic ones.

Credit card reforms could unlock competition

Two economists retained by merchant plaintiffs — Nobel Prize winner Joseph Stiglitz and University of Washington professor Keith Leffler — told the court the reforms could save merchants $38 billion by 2031 and as much as $224 billion overall, by reducing the “upward spiral” in fees and boosting market competition, according to Reuters reporting.

Merchants have long argued that Visa and Mastercard operate as a duopoly, using network rules to suppress competition from lower-fee payment systems and digital wallets.

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Although Visa and Mastercard did not admit wrongdoing, both companies are seeking closure on a legal fight that has stretched across multiple administrations and regulatory regimes.

Their shares were little changed following the announcement.

The bigger battle over credit-card fees

Interchange fees are a flashpoint for both retailers and lawmakers. The fees fund credit-card rewards programs and fraud protection but also raise merchants’ costs — which often get passed on to consumers through higher prices.

A coalition of U.S. senators, led by Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.), continues to push legislation that would require more competition in card processing. The bipartisan Credit Card Competition Act, introduced in 2023, seeks to force major banks to enable at least two unaffiliated networks on every card, including one outside the Visa-Mastercard system.

Retailers argue the law would save billions annually and reduce costs for small businesses. Visa and Mastercard say the proposal would hurt fraud prevention and threaten consumer privacy.

U.S. credit-card fees are big business

• $111.2 billion: Estimated value of swipe fees paid by U.S. merchants in 2024
• 2.0% to 2.5%: Typical interchange fee rate per card transaction before the settlement’s proposed reduction
• 1.25% cap: Maximum fee rate for standard consumer cards under the proposed settlement for eight years
• $30 billion: Value of the prior settlement proposal that was rejected in 2024 Source: Reuters

Judge Brodie will now determine whether the $38 billion settlement adequately compensates merchants and promotes fair competition. If she approves, it would mark one of the largest antitrust resolutions in U.S. history.

If the judge rejects the latest settlement offer, Visa and Mastercard could face renewed litigation, and Congress could ultimately step in to regulate swipe fees directly.

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