Visa, Mastercard Settle Swipe-Fee Dispute with U.S. Merchants
Visa and Mastercard have announced a new settlement to resolve a long-standing legal dispute with U.S. merchants over swipe fees. This settlement comes after a previous agreement was rejected by a federal judge for being insufficient.
Background of the Settlement
Over the past two decades, merchants have accused these major card networks of violating U.S. antitrust laws. They claimed that Visa and Mastercard colluded with banks to unreasonably charge “swipe fees” for credit card transactions. These fees, often referred to as interchange fees, are typically 2% to 2.5% of each transaction.
Key Settlement Details
The new accord, which awaits court approval, aims to reduce swipe fees by 0.1 percentage points over five years. Under this agreement:
- Merchants can select which U.S. cards to accept based on specific categories.
- Capped rates for standard consumer cards will not exceed 1.25% until the agreement ends.
- Enhanced options for merchants to apply surcharges will be provided.
Financial Implications
According to the National Retail Federation, swipe fees in the U.S. reached $111.2 billion in 2024, a significant increase from $100.8 billion in 2023. This figure marks a fourfold rise since 2009. Visa has stated that the settlement will offer “meaningful relief” and better flexibility for merchants.
Concerns from Merchants
Despite the positive outlook from Visa and Mastercard, some merchants remain critical of the settlement. Doug Kantor from the National Association of Convenience Stores voiced concerns that banks are not incentivized to lower their rates while Visa and Mastercard may still increase their charges.
Comparisons with International Settlements
In contrast, Canada reached a different settlement with Visa and Mastercard in 2023, limiting interchange fees to an average of 0.95%, significantly lower than the prior level of about 1.4%. This agreement was anticipated to save Canadian retailers approximately $1 billion over five years, although it faced criticism from small business owners.
Impact on Businesses and Consumers
Small merchants may especially benefit from the settlement, as they seek more manageable costs and streamlined regulations for credit card transactions. However, many merchants still feel constrained by the “Honor All Cards” rule and “anti-steering” prohibitions, which limit their ability to encourage customers to choose cheaper payment options.
This revised settlement marks a critical development in the ongoing dialogue about credit card processing fees and their impact on businesses across the United States.
