Visa and Mastercard reach swipe-fee settlement with merchants in U.S.

Visa and Mastercard announced a revised settlement with merchants who accused the card networks of charging too much to accept their credit cards, after a judge rejected an earlier $30-billion US accord as inadequate.

Monday’s settlement would end 20 years of litigation where businesses accused Visa, Mastercard and banks of conspiring to violate U.S. antitrust laws, including through the card networks’ collection of “swipe fees” to process transactions.

The accord, which requires court approval, calls for Visa and Mastercard to lower swipe fees, which are now typically around two per cent to 2.5 per cent, by 0.1 percentage points for five years.

Merchants would be allowed to choose whether to accept U.S. cards in specific categories, including commercial cards, premium consumer cards — including many popular “rewards” cards — and standard consumer cards.

Standard consumer rates would be capped at 1.25 per cent until the agreement expires. Merchants would also get more options to impose surcharges when people pay by credit card.

Also known as interchange fees, swipe fees totalled $111.2 billion in the United States in 2024, up from $100.8 billion in 2023 and quadruple the level in 2009, according to the National Retail Federation, the largest U.S. retail trade group.

Visa said the settlement provides merchants “of all sizes” with “meaningful relief, more flexibility and options to control how they accept payments from their customers.”

Mastercard said smaller merchants in particular would benefit from more flexibility, lower costs and simpler rules, with businesses and consumers enjoying a “better payments experience.”

Neither company admitted wrongdoing in agreeing to settle.

Merchants critical of settlement

The settlement comes after U.S. District Judge Margo Brodie in Brooklyn rejected a $30-billion accord in June 2024.

That agreement would have lowered swipe fees by about 0.07 percentage points over five years, and also given merchants more room to impose surcharges.

But the judge said fees would remain elevated, and the $6 billion in annual savings for merchants was “paltry” relative to how much Visa and Mastercard could still charge.

She also faulted the accord for sticking merchants with the “Honor All Cards” rule requiring that they accept all Visa and Mastercard cards, or none.

Merchants have long also accused Visa and Mastercard of enforcing “anti-steering” rules that prevent businesses from directing customers toward cheaper means of payment.

Doug Kantor, general counsel of the National Association of Convenience Stores, said the settlement doesn’t give banks an incentive to lower rates they charge, while it lets Visa and…