After two decades of legal battles, Visa and Mastercard have reached a revised $38 billion settlement with U.S. merchants — one of the largest antitrust agreements in the financial industry’s history. Yet, despite the record amount, not all retailers are ready to celebrate.
The proposed settlement, filed in federal court in Brooklyn, New York, aims to end years of litigation accusing the credit card giants and several major banks of conspiring to keep “swipe fees” — the charges merchants pay when customers use credit or debit cards — artificially high.
If approved by U.S. District Judge Margo Brodie, the deal would mark the conclusion of a 20-year dispute that has pitted small businesses and major retailers alike against the two dominant payment networks in the country.
A Long Road to Settlement
The antitrust lawsuit traces back to the early 2000s, when merchants first challenged the structure of card processing fees. These fees — formally known as interchange or swipe fees — are paid by retailers to the banks that issue cards and typically average around 2% to 3% of every credit card transaction.
Critics argue that Visa and Mastercard’s control of the market, combined with their “Honor All Cards” rule (which requires merchants to accept all cards if they accept one), left retailers little negotiating power. Over time, merchants contended, the lack of competition caused billions of dollars in excess charges that were ultimately passed on to consumers.
This latest $38 billion deal follows a smaller $30 billion settlement proposal from June 2024, which Judge Brodie rejected earlier this year as insufficient. The revised agreement attempts to address the court’s concerns by introducing a broader set of reforms and stronger guarantees for merchants.
What the Settlement Provides
Under the newly revised terms, Visa and Mastercard will commit to several major changes intended to lower costs and increase flexibility for businesses:
- Fee reductions: Average swipe fees, which stood at roughly 2.35% in 2024, would be cut by 0.1 percentage point for five years.
- Caps on rates: Standard consumer-card interchange fees will be capped at 1.25% for eight years, representing more than a 25% drop from current levels.
- Merchant flexibility: Retailers will have the option to surcharge up to 3% for card payments to help offset processing costs.
- Choice in card acceptance: Merchants can now choose which card categories they want to accept — including standard, premium, or commercial cards — allowing them more control over their transaction expenses.
The settlement also aims to deliver long-term systemic changes. According to economists advising the plaintiffs — including Nobel Prize winner Joseph Stiglitz and Professor Keith Leffler — the new rules could save U.S. merchants about $38 billion by 2031 and potentially lead to a total of $224 billion in savings over time as the payments market adjusts to a more competitive environment.
Importantly, Visa and Mastercard have not admitted any wrongdoing as part of the settlement.
Why Some Merchants Aren’t Convinced
Despite the eye-catching figures, opposition remains strong among some merchant groups. The National Retail Federation (NRF), one of the nation’s largest retail trade organizations, has publicly voiced skepticism about the deal.
Stephanie Martz, the NRF’s general counsel, noted that while the settlement offers merchants more theoretical flexibility, many small businesses would still be unable to turn down certain card types without alienating customers. “You would lose a lot of business if you refused 80% of the cards people want to use,” she said.
Other merchant representatives argue that the ability to impose surcharges — though expanded — doesn’t meaningfully shift the balance of power. Many businesses fear that openly charging customers for card use could hurt sales, leaving them unable to recoup swipe-fee costs in practice.
Additionally, critics say the settlement does not fully eliminate the “Honor All Cards” rule or prevent banks and card networks from increasing other fees to make up for the reductions.
Support from Financial Industry Groups
Not everyone opposes the agreement. The Electronic Payments Coalition (EPC) — which represents major card issuers such as Bank of America, JPMorgan Chase, Capital One, and Citibank — praised the deal as a fair compromise.
According to the EPC, the new arrangement provides “real and significant relief” to merchants while maintaining the essential infrastructure of the U.S. payment system. The group also argues that the settlement compares favorably to legislative proposals like the “Credit Card Competition Act,” which would have imposed direct government regulation on interchange fees.
For Visa and Mastercard, the settlement offers a chance to move beyond a decades-long legal cloud without admitting liability. The companies insist that swipe fees fund critical aspects of card security, innovation, and fraud prevention — costs they say benefit both consumers and retailers.
What Comes Next
Judge Brodie must now decide whether to approve the agreement. The process is expected to involve months of review, including opportunities for merchant groups to file objections or request modifications.
If finalized, the settlement could reshape how card transactions are priced and processed across the U.S. retail landscape. Larger chains may see immediate benefits from reduced interchange costs, while smaller merchants will be watching closely to see whether the new flexibility actually results in savings.
Broader Implications
The $38 billion figure underscores the immense financial stakes tied to credit-card processing in the U.S. Payments industry experts note that American merchants collectively pay more than $170 billion annually in card processing fees — costs that often exceed profits for small retailers.
This settlement, if implemented effectively, could mark a turning point by rebalancing relationships between merchants and payment networks. Still, with major trade associations divided and continued debate over long-term enforcement, it’s clear that the fight over swipe fees is far from over.
Bottom Line:
The Visa and Mastercard settlement represents a massive step toward resolving one of the longest-running antitrust battles in American financial history. Yet, questions remain about whether this landmark deal will truly level the playing field for merchants — or simply provide temporary relief while preserving the card networks’ dominance.
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