Visa and Mastercard Reach Landmark Settlement to End Longstanding Fee Dispute

Under the proposed terms, Visa and Mastercard will reduce the average interchange rate — the fees paid by retailers when customers use credit cards — by 10 basis points for five years, per regulatory filings cited by Bloomberg. In addition, U.S. consumer credit rates will be capped at 125 basis points during that period.

Mastercard said in a statement that it views the resolution as a balanced outcome that “delivers the clarity, flexibility and consumer protections that were sought in this effort.” The company added that smaller merchants stand to gain the most from the agreement through lower costs and simplified rules.

According to Bloomberg, credit and debit card swipe fees reached a record $187.2 billion last year, based on data from the Merchant Payments Coalition (MPC). Retailers have long argued that these fees are excessive and primarily benefit large banks such as JPMorgan Chase & Co., Capital One Financial Corp., and Citigroup Inc., which receive a significant portion of the revenue from card transactions.

The MPC has expressed opposition to the deal, contending that Visa and Mastercard’s fee reductions are insufficient. Jennifer Hatcher, a member of the coalition’s executive committee, said that the proposed cuts apply only to the portion of fees passed to banks, allowing the card networks themselves to potentially raise their own charges. Hatcher warned that “all of the supposed merchant and consumer savings could easily be canceled by Visa and Mastercard increasing their fees.”

Read more: Visa and Mastercard Agree to $199.5 Million Settlement Over Chargeback Rules

This settlement follows a prior agreement reached last year that would have saved merchants an estimated $30 billion over five years. That deal, however, was rejected by U.S. District Judge Margo Brodie in June 2024, who expressed concern about the networks’ “honor all cards” rule — a policy requiring merchants to accept all Visa or Mastercard credit cards if they accepted any.

In the new proposal, merchants would be able to choose whether to accept cards from three categories: commercial, premium consumer, or standard consumer. This change could reshape checkout practices nationwide, giving retailers more control over which cards they process. The agreement would also allow merchants to impose surcharges on customers using Visa or Mastercard products, another key shift from prior rules.

Analysts Joseph Stiglitz and Keith Leffler, who served as expert economists for the retailers, estimated that about $38 billion in savings would come from the reduced interchange fees. The remainder, they said, would result from rule changes such as ending mandatory acceptance of all card types and allowing surcharges.

Visa, in its own statement, said that after more than 20 years of litigation, the agreement provides “meaningful relief, more flexibility and options to control how merchants accept payments from their customers.”

If approved, the settlement would mark the conclusion of one of the longest-running and most consequential disputes in the U.S. payments industry — and could significantly reshape how merchants and consumers interact at the checkout counter, per Bloomberg.

Source: Bloomberg