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A fresh settlement between Visa, Mastercard and US merchants promises to trim interchange fees—yet the concessions may do little to shift the balance of power in America’s card-payments ecosystem.
Visa and Mastercard’s interchange truce
After nearly two decades of litigation, the card networks have agreed to reduce interchange by 10 basis points, a modest decline from the current average of around 1.6%.
The headline figure—roughly $38 billion in savings for merchants through 2031—sounds dramatic. But measured against the $9 trillion in annual Visa and Mastercard spend, the relief is marginal.
The proposal still requires approval from US District Judge Margo Brodie, who rejected a similar arrangement in 2024 for offering too little structural change.
Many merchant groups, including the National Retail Federation, see this version much the same: a cosmetic haircut that leaves the underlying economics untouched.
Meanwhile, the Electronic Payments Coalition, whose members benefit from interchange revenue, has unsurprisingly backed the deal.
Selective Acceptance: A Crack in the ‘Honour All Cards’ Rule
For merchants, the headline reform is a newfound ability to segment card acceptance.
Under the revised framework, retailers can choose whether to accept three distinct card categories: commercial cards, premium consumer cards, and standard no-rewards cards.
If they opt in to a category, they must honour all cards within it—but they can now refuse entire families of high-cost cards.
This marks a significant departure from the long-standing “honour all cards” obligation, which forced merchants to accept even the most expensive rewards cards.
In practice, few retailers are likely to reject cards that consumers heavily rely on—premium rewards cards make up about 90% of credit card spend. But the option itself gives merchants a sliver of leverage they never previously enjoyed.
Some may experiment with incentives to steer customers toward lower-cost payment methods, from extra loyalty points to small checkout discounts.
Surcharging Gains Ground
The settlement also widens the ability to apply surcharges of up to 3% based on card type. This shift enshrines a mechanism for passing costs directly to consumers.
Whether merchants will use it aggressively is another matter: shoppers tend to bristle at visible fees, and retailers risk abandoned baskets both in-store and online.
Still, the power to surcharge adds a further pressure point for future negotiations.
Interchange Remains the Industry’s Black Box
The broader question—why interchange remains stubbornly high—remains unanswered.
Interchange comprises around 70% of the merchant discount rate (MDR), with card-brand fees and acquirer charges making up the remainder. Yet the methodology behind Visa and Mastercard’s rates is not publicly disclosed.
Issuers argue the revenue funds fraud prevention, credit risk management, dispute handling, authorisation and settlement systems, account servicing and, crucially, rewards programmes that drive consumer spending.
Merchants counter that physical-world fraud has plummeted and that scale efficiencies should have driven down costs long ago.
Without transparency, they argue, it is impossible to know whether interchange reflects genuine risk and operational expenditure—or simply entrenched pricing power.
A Step, Not a Settlement
Visa and Mastercard dominate roughly three-quarters of US card purchase volume, a level of concentration unmatched in most major economies.
Against that backdrop, even a decades-long lawsuit appears capable of producing only incremental change. The latest settlement offers merchants tactical tools rather than structural reform.
The fight over interchange—its opacity, its magnitude and its economic logic—is unlikely to fade any time soon.
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