Visa and Mastercard Agree to Settlement That Reduces Credit Card Fees and Expands Merchant Control
Visa and Mastercard have reached a revised settlement in a federal antitrust lawsuit brought by U.S. merchants, announced earlier this month, that would reduce certain credit card fees and adjust longstanding card acceptance rules. The agreement, which a federal judge must review before it can take effect, would give retailers more discretion over the card types they accept and modify key elements of how credit card transactions are processed.
The proposal, valued at roughly 38 billion dollars in projected merchant savings, centers on changes to interchange fees and the limits placed on certain credit card rates. Interchange fees are the amounts businesses pay each time a customer uses a credit card and typically range between 2 percent and 3 percent of the transaction amount. These fees are set by the payment networks and collected by issuing banks. Under the agreement, Visa and Mastercard would reduce average interchange fees by approximately 0.10 percent over five years and cap certain standard consumer credit card rates at 1.25 percent.
The lawsuit began in 2005, when a group of merchants filed a nationwide class action in the Eastern District of New York. They accused Visa, Mastercard, and major issuing banks of coordinating to fix interchange fees and enforcing acceptance rules that restricted competition. One of the central allegations involved the honor all cards rule, which obligated merchants to accept every card within a network, even when some carried higher fees. As higher-fee credit card categories expanded, merchants said they faced rising costs without the ability to decline cards with the highest associated rates.
Unlike debit card transactions, which are governed in part by the Durbin Amendment, credit card interchange fees are not capped under federal law. This regulatory gap has contributed to longstanding concerns among merchants as fees increased over time. Several proposed resolutions were considered during the litigation, but earlier agreements did not advance, including a June 2024 proposal that Judge Margo Brodie rejected for not providing sufficient relief to smaller retailers. The revised terms now under review aim to address those issues by introducing fee caps, clearer disclosures, and expanded acceptance flexibility for merchants.
Under U.S. antitrust law, companies may be held liable if they adopt practices that restrain trade or reduce competition. The merchants argue that the card networks used their market positions to limit their ability to influence the cost of accepting credit cards. Visa and Mastercard operate payment networks, which are systems that route transaction data between merchants, processors, and issuing banks. Because the case is a certified class action, any settlement must undergo a structured approval process that ensures fairness for all members of the merchant group.
If approved, the agreement would make significant changes to card acceptance practices. Merchants would be allowed to accept lower-cost cards while declining higher-fee credit cards, and they would have clearer rights to guide customers toward payment methods with lower processing costs. These adjustments represent a notable shift from the prior uniform acceptance structure that governed most credit card transactions.
Merchants would also retain the option to impose surcharges where allowed under state law. In practice, a surcharge is a small fee added to help recover processing costs, but several states restrict or prohibit the practice through consumer protection statutes.
Consumers could also feel the effects because rewards programs are funded in part by the interchange fees merchants pay on credit card purchases. If retailers choose to limit certain higher fee cards or encourage lower cost options, customers may encounter differences in the cards individual businesses choose to accept.
Interchange fees have long been a point of tension between merchants and card networks. Industry data indicates that Visa and Mastercard collected more than 111 billion dollars in credit card interchange fees in 2024.
The revised agreement comes at a time of heightened regulatory interest. The Credit Card Competition Act, which is pending in Congress, would require large issuing banks to offer more than one network option for routing transactions. Several large merchants continue to pursue separate lawsuits seeking monetary damages related to past interchange fees and acceptance policies. Those cases remain active, with some scheduled for trial next year.
The settlement will now move to Judge Brodie for preliminary approval in early 2026. If the court grants preliminary approval, the terms will be shared with merchants nationwide before the court conducts a final review.
