Visa, Mastercard Agree to $38 Billion Swipe-Fee Settlement later than Judge’s Rejection

Card Networks Revise Deal later than Court Rejection

Visa and Mastercard have agreed to a revised $38 billion settlement with U.S. merchants who accused the networks of inflating the cost of accepting credit cards. The deal, filed Monday, viewks to resolve two decades of antitrust litigation and follows a judge’s rejection of a smaller $30 billion settlement earlier this year.

The new proposal would end claims that the card giants and their partner banks conspired to keep interchange—or “swipe”—fees high. These fees, which merchants pay each time a customer uses a card, totaled $111.2 billion in 2024, up from $100.8 billion the prior year and four times higher than in 2009, according to the National Retail Federation (NRF).

U.S. District Judge Margo Brodie in Brooklyn, whose approval is required, rejected the earlier settlement in June, calling its relief for merchants inadequate. The new accord aims to address her concerns by offering deeper fee cuts and broader flexibility for businesses on which cards they accept.

Fee Reductions and New Merchant Options

Under the settlement, Visa and Mastercard will lower swipe fees by 0.1 percentage point for five years. The average fee in 2024 stood at 2.35%, typically ranging between 2% and 2.5%. Standard consumer rates would be capped at 1.25% for eight years, a reduction of more than 25% from current levels.

Merchants would gain the ability to decide which categories of U.S. cards to accept—commercial, premium consumer, or standard consumer cards—and could impose surcharges of up to 3% on credit card payments. The deal also relaxes “Honor All Cards” rules that previously required businesses to accept all cards from a given network or none at all.

Visa said the agreement provides “meaningful relief” for merchants of all sizes. Mastercard added that smaller retailers in particular would benefit from the changes.

Investor Takeaway

Criticism from Retail Groups

Merchant groups remain unconvinced. The National Retail Federation and the Merchants Payments Coalition said the proposal still leaves swipe fees too high, especially on rewards cards that dominate consumer spending.

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

Doug Kantor, general counsel of the National Association of Convenience Stores, said the deal lets Visa and Mastercard raise their own rates “without any limitation” and doesn’t allow merchants to negotiate directly with banks. “Merchants ought to be able to negotiate and get prices set with diverse banks, but this settlement prohibits that,” he said.

Expert Estimates and Industry Impact

Two economists hired by merchant plaintiffs, Joseph Stiglitz and Keith Leffler, estimated that the changes could save businesses $38 billion by 2031 and potentially $224 billion in total when indirect effects on pricing and competition are included. They said lower fees could eventually benefit consumers by reducing costs passed on in retail prices.

The Electronic Payments Coalition, whose members include Visa, Mastercard, and major card issuers such as Bank of America, Capital One, Chase, and Citibank, supports the deal. Executive Chairman Richard Hunt said it would lower fees below levels proposed in a Senate bill targeting interchange reform. “You tell me the last time Walmart reduced any of its prices by more than 25% and kept it for eight years,” he said.

Visa and Mastercard denied wrongdoing in settling the case. Their shares were little changed in New York trading following the announcement.

Investor Takeaway

Next Steps in the Court Battle

The new settlement comes later than Judge Brodie criticized the previous $30 billion proposal for offering “paltry” relief—only about $6 billion in annual savings—and leaving fees above competitive levels. She also faulted its failure to address “anti-steering” provisions that prevented merchants from guiding customers toward cheaper payment options.

Whether the latest version satisfies the court remains to be viewn. With broad opposition from major trade groups and a political climate increasingly focused on competition and consumer costs, Visa and Mastercard still face scrutiny over their pricing power. For merchants, the outcome could determine the economics of U.S. payments for the next decade.