After two decades of courtroom battles and merchant outrage, Visa and Mastercard have unveiled a massive $38 billion settlement aimed at putting to rest claims that they conspired to keep credit card “swipe fees” sky-high. The agreement, if approved, would rewrite the rules of one of the most lucrative — and controversial — corners of American commerce.
But not everyone’s cheering.
Merchant groups, led by the National Retail Federation and the Merchants Payments Coalition, are already calling foul, saying the proposal fails to fix the fundamental imbalance that has allowed the two payment giants to dominate the market for years. “You can’t just tell 80% of your card customers you won’t take their cards — that’s business suicide,” one retail representative said, summing up the frustration.
The fees at the heart of the dispute — officially called “interchange fees” — cost U.S. businesses $111.2 billion last year alone, quadrupling since 2009. Under the proposed terms, Visa and Mastercard would trim average processing costs by 0.1 percentage point for five years, bringing them slightly below the current 2.35% average. Standard consumer card rates would be capped at 1.25% for eight years, a cut of more than a quarter.
For merchants, the deal also promises new freedoms: the ability to choose which types of cards to accept and the power to impose surcharges of up to 3% for card payments. Visa, based in San Francisco, called the plan “meaningful relief for businesses of all sizes.” Mastercard, headquartered in New York, said small merchants stand to gain the most.
Economists Joseph Stiglitz and Keith Leffler, analyzing the agreement for the plaintiffs, claim it could save businesses $38 billion by 2031 and potentially unleash $224 billion in broader economic benefits — assuming the reforms hold.
This new proposal replaces a $30 billion version thrown out by U.S. District Judge Margo Brodie last year, who dismissed it as “paltry” and criticized its failure to address key antitrust issues — including the infamous “Honor All Cards” rule that forces merchants to accept all Visa and Mastercard products or none at all.
The latest deal attempts to remove that chokehold. Still, merchant coalitions argue it leaves too much discretion in the hands of the same networks they’ve accused of monopolizing digital payments.
The Electronic Payments Coalition, representing the card networks and major banks like Chase, Citibank, and Bank of America, has lined up behind the accord, calling it a fair compromise that goes beyond what some lawmakers have proposed. “Show me the last time a major retailer cut prices by 25% and kept them that way for eight years,” said one banking representative, defending the deal.
Retail advocates aren’t convinced. “This doesn’t create competition — it preserves control,” countered a representative for convenience stores. “Visa and Mastercard can still set the rules, and that’s the problem.”
Whether this settlement finally ends the twenty-year fight over swipe fees — or just sparks the next round — now lies in the hands of a skeptical federal judge in Brooklyn.
