Visa and Mastercard move to end two-decade swipe fee battle

A landmark legal battle that has shaped the economics of card payments in the United States for more than twenty years has taken another significant step towards resolution after a federal judge granted preliminary approval to a revised $38 billion settlement between merchants and card networks Visa and Mastercard.

Visa and Mastercard move to end swipe fee battle

The case, originally filed in 2005, centres on allegations that the two schemes and their banking partners violated antitrust laws by imposing excessive interchange fees – commonly known as swipe fees – on merchants. The settlement, if ultimately approved, would represent one of the largest antitrust agreements in US history and could have far-reaching implications for the payments industry.

Merchants Win Fee Reductions and Greater Flexibility

Under the terms of the agreement, Visa and Mastercard have agreed to reduce interchange fees by 0.1 percentage points for five years. In addition, standard consumer card fees would be capped at 1.25% for eight years.

The settlement also introduces structural changes that merchants have sought for years. Most notably, it would weaken the long-standing “Honor All Cards” rule, allowing businesses to choose whether to accept certain categories of cards, including commercial and premium rewards products, rather than being forced to accept all cards issued under a particular network.

Merchants would also gain greater flexibility to impose surcharges on higher-cost cards, potentially encouraging consumers to use lower-cost payment methods.

The proposed changes come against a backdrop of steadily rising interchange costs. According to merchant groups, Visa and Mastercard generated almost $119 billion in US swipe fees during 2025 alone, compared with $25.6 billion in 2009.

Opposition Remains Strong

Despite the size of the settlement, opposition from major retail organisations remains fierce. The National Retail Federation (NRF), National Association of Convenience Stores (NACS), Walmart and the Merchants Payments Coalition argue that the agreement fails to address the underlying lack of competition within the card payments market.

Critics contend that merchants will still be unable to reject cards from specific issuers within a network and that premium rewards cards will continue to command disproportionately high fees.

US District Judge Brian Cogan acknowledged that many of the objections had merit but concluded that the settlement represented a reasonable compromise when weighed against the uncertainty and risks associated with continuing litigation.

What It Means for Consumers

For consumers, the impact is less clear. While merchants could benefit from lower processing costs, there is no guarantee that any savings will be passed on through lower retail prices.

At the same time, some businesses may choose not to accept premium rewards cards or could increase surcharges on higher-cost transactions. However, given the popularity of rewards credit cards among US consumers, many large retailers may be reluctant to restrict acceptance.

The settlement still requires final judicial approval, and further legal challenges are expected. Nevertheless, the ruling marks a significant milestone in one of the most consequential disputes ever fought over the cost of accepting card payments.