Visa Mastercard swipe fee settlement explained : A long-running legal fight over credit card “swipe fees” has taken a new step forward after a US district judge granted preliminary approval to a $38 billion settlement involving Visa and Mastercard and millions of merchants. The case, which has stretched for more than two decades, centers on claims that the card networks charged excessive processing fees.
A previous $30 billion version of the settlement was rejected two years ago in another court, making this latest ruling another key development rather than a final resolution.
What the Visa and Mastercard Swipe Fee Dispute Is About
The dispute began with a class-action lawsuit filed in 2005 by more than 12 million merchants. It accuses Visa and Mastercard of charging excessive “swipe fees” when customers pay using credit cards, as per a report.
By 2025, merchants were paying nearly $119 billion in swipe fees, with many small businesses either absorbing the cost or passing it on to customers through 3% to 4% surcharges or cash discounts.
What the $38 Billion Settlement Would Change
If the settlement receives final approval, Visa and Mastercard have agreed to reduce swipe fees (interchange fees) by 0.1 percentage point for five years, as per a Yahoo Finance report.
In addition, standard consumer card fees would be capped at 1.25% for eight years. For context, merchants paid an average of 2.35% in processing fees in 2024.
However, it is still unclear whether any savings from these reductions would actually reach consumers.
Possible Impact on Rewards and Premium Credit Cards
One of the most notable potential changes involves rewards and premium credit cards.
The “honor all cards” rule, which currently requires merchants to accept all Visa and Mastercard products, would be removed under the settlement, as per the Yahoo Finance report.
This could allow merchants to refuse higher-cost rewards or commercial cards, although major retailers have indicated that such cards are widely used and unlikely to be rejected.
Merchants Could Pass Fees to Customers More Directly
The settlement would also allow merchants to pass additional processing costs directly to customers in some cases.
This could come in the form of surcharges on higher-fee cards or discounts for lower-fee payment methods.
Retail Industry Response Remains Divided
Not all merchants support the agreement. The National Retail Federation has said it is “disappointed” with the preliminary approval, arguing that the settlement does not provide meaningful relief, as per the Yahoo Finance report.
It also stated that the proposal leaves intact a system that allows Visa and Mastercard to set the rules and costs that merchants and consumers must bear.
The group added that it will continue participating in the next phase of proceedings.
FAQs
What are swipe fees?They are processing charges merchants pay when customers use credit cards.
What change would the settlement bring to fees?
Swipe fees would be reduced by 0.1 percentage point for five years.
