Visa and Mastercard $38 Billion Swipe Fee Settlement: What It Means for You

The 20-year litigation against Visa and Mastercard can be resolved as they announced the $38 billion settlement. The credit card companies would lower swipe fees with this settlement. Let’s see what this settlement would mean for retailers and customers. 

The merchants have filed a lawsuit against Visa and Mastercard for charging higher swipe fees (interchange fees) and violating the US antitrust laws. The swipe fee is the fee that merchants pay when they process the customer’s credit card for payment. 

The credit card companies have denied the accusations, and the settlement has been delayed for a long time. This is the third time a settlement has been proposed, but it has not yet been approved by the federal court. 

What does the Visa and Mastercard settlement cover?

If you are wondering what the newly proposed Visa and Mastercard settlement covers, you can find everything here:

• Both credit card companies will lower the swipe fees by 0.1% for five years, as typically it is averaged to 2.35%. 
•  The settlement offers to cap the standard consumer rates for eight years at 1.25%, offering merchants some flexibility in processing costs. 
• The settlement of $38 billion would lower the fees and offer some relief to the retailers or merchants. 
• The settlement revoked the Honor All Cars rules for the merchants. The merchants will have the freedom to decline high-fee cards and decide whether to accept the premium cards, as they have high processing fees. 

What does the settlement mean for the merchants?

The merchants who are wondering about the Visa and Mastercard settlement and its benefits to them can find everything about it below:

• The freedom to accept or decline certain cards would benefit the merchants and save them money. The commercial cards, premium or rewards cards, generally have high swipe fees. 
• The merchants will have the power to impose a surcharge, an extra fee to cover the swipe fees, when the customer pays through a credit or debit card. Before the settlement, merchants had rigid rules about the surcharging from Visa and Mastercard; they avoided it. 
• According to the proposed settlement, this deal will allow the US merchants to save the $200 billion paid to Visa, Mastercard, and banks as processing fees. 
• The big merchants will benefit the most through this settlement, but not the small merchants. 

How does the settlement affect the customers?

The Visa and Mastercard settlement of $38 billion would also affect the customers, as the swipe fee will be lowered, such as:

• As per the trade groups, this settlement would not save anything for the customers. In fact, it can create confusion as customers are not aware of the cards that will have lower fees. 
• With the merchants having freedom to accept and decline the high fee cards, the customers can face the confusion of using which cards, though the merchants will guide them to lower fee cards. 
• With the surcharge flexibility, customers can expect extra fees at checkout based on how they pay, as the merchants can include the swipe fees in the bill. 
• The settlement will introduce more transparency for the customers, but a little bit of complexity and confusion. 

Will the settlement get the court’s approval?

The settlement over the Visa and Mastercard swipe fees was proposed for the third time, and it still awaits federal court approval to be finalized. Before this, we have the following two settlement proposals:

• The $7.25 billion settlement was ruled out in 2016 because the merchants were not okay with the settlement. 
• Later, in 2024, a settlement of $30 billion was rejected by the federal judge because the judge said the fees would remain high and it would not affect customers. The $30 billion settlement would have lowered the fees by 0.7% and would have given the merchants the freedom to impose surcharges. 

The 2024 settlement did not eliminate the Honor All Cards rule for the merchants, but now the latest settlement does; let’s see how it would come out for the merchants. 

We can find out in four months or before, if the federal court approves the $38 billion settlement and lets the merchants save around $200 billion a year. The settlement would be resolved after two decades, if it is approved, so merchants keep an eye on the further proceedings. 

Disclaimer: The $38 billion settlement involving Visa and Mastercard is for general awareness only. For full terms, eligibility, and approval status, refer to the official settlement documents.