Visa and Mastercard forge deal to end long-term dispute with merchants

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Visa and Mastercard have agreed to lower the fees they charge retailers in the US, in the card groups’ latest attempt to settle a 20-year dispute with merchants after a judge rejected last year’s $30bn settlement.

Under the terms of the deal announced on Monday, the card companies will cut so-called interchange fees levied to merchants by an average of 0.1 percentage points over five years. The agreement will also give merchants more flexibility around the types of credit cards they accept, provided that they do not discriminate between providers.

Interchange fees — also referred to as swipe fees in the US — are costs that card networks levy to merchants on behalf of banks. They are particularly high on credit card payments in the US at about 2 per cent, relative to other markets such as the EU, where they are capped.

The settlement will be subject to final approval by a federal court in New York. It comes after a judge rejected a previous deal agreed in March 2024 that would have led the companies to lower interchange fees by about 0.07 percentage points on average over five years. Merchants had said that the previous pact would save them $30bn.

Visa said “after more than 20 years of litigation, Visa and Mastercard have reached a proposed settlement with US merchants of all sizes that would provide meaningful relief, more flexibility and options to control how they accept payments from their customers”.

Still, some major trade bodies including the National Retail Federation and the Merchants Payments Coalition criticised the proposed settlement, saying it does not go far enough to address their concerns over swipe fees.

“One would hope that a settlement in 2025 would, especially during tariffs . . . truly give retailers some relief here in terms of their overhead costs,” said Stephanie Martz, general counsel of the National Retail Federation.

One particular flashpoint that led to the previous settlement being rejected was the card networks’ “honour all cards” rule, which forces merchants who take credit cards to also accept premium and rewards cards with much higher fees. Under Monday’s proposed settlement, merchants will be able to choose whether to accept distinct categories of cards: commercial, premium and consumer.

Martz, however, said that lumping credit cards within broad categories did not satisfy retailers’ desire to single out specific reward cards with particularly high fees when deciding whether to accept them.

“[It] doesn’t work because 85 per cent of the cards used in the US are for these rewards cards,” said Martz.

Both groups said they were pushing for Congress to pass the Credit Card Competition Act, which the Merchants Payments Coalition estimates will save merchants $17bn a year by making it easier for large banks to process credit card payments on alternative card networks.