Visa and Mastercard Reach Swipe-Fee Settlement with U.S. Merchants

What It Means for North American Businesses

A 20-year legal battle between merchants, Visa, and Mastercard is nearing resolution. The two largest card networks have agreed to a revised settlement with U.S. merchants who accused them of charging excessive fees to accept their credit cards. The new agreement highlights a continuing global focus on interchange and swipe fees and draws comparisons to similar settlements already implemented in Canada.

‍

The U.S. Settlement: A Long Road to Change

The proposed U.S. settlement follows decades of litigation in which businesses alleged that Visa, Mastercard, and several banks conspired to fix swipe fees, also known as interchange fees.

The agreement would lower average fees, currently between two and 2.5 percent, by 0.1 percentage points for five years. It would also cap standard consumer card rates at 1.25 percent and allow merchants to choose whether to accept certain types of U.S. cards, including commercial, premium, and standard consumer cards.

Merchants would gain greater flexibility to apply surcharges for credit card use, giving them some ability to offset processing costs. However, critics argue that the settlement may not go far enough to create lasting relief.

‍

Merchants React to the Settlement

Although Visa and Mastercard describe the settlement as providing “meaningful relief” and “more flexibility,” many business groups have expressed concern.

Doug Kantor, general counsel for the National Association of Convenience Stores, said the settlement does not provide enough incentive for banks to reduce their fees and that Visa and Mastercard can still raise rates once the term expires. Merchants also continue to face restrictions under the “Honour All Cards” rule, which prevents them from declining higher-fee rewards cards that make up more than 80 percent of all cards in circulation.

While the settlement still requires court approval, it represents one of the largest antitrust resolutions in U.S. payments history.

‍

Canada’s Earlier Action on Swipe Fees

In Canada, similar issues were addressed earlier. In 2023, the federal government reached an agreement with Visa and Mastercard to limit interchange fees to an average of 0.95 percent, down from approximately 1.4 percent. The change was expected to save Canadian retailers about $1 billion over five years.

However, small businesses noted that the savings primarily benefit merchants that process significant volumes through Visa or Mastercard, leaving many smaller retailers with limited relief.

A 2022 class action lawsuit settlement also allowed Canadian merchants to pass on credit card fees to customers through surcharges of up to 2.4 percent, provided the fee is disclosed clearly at checkout. The agreement additionally required Visa and Mastercard to refund millions of dollars in previously collected fees.

‍

The Bigger Picture for Merchants

For North American businesses, these settlements underline a growing global focus on transparency and fairness in payment processing. With credit card fees representing a significant cost of doing business, especially for small retailers, even minor reductions can have a meaningful impact on profit margins.

The challenge lies in balancing fair merchant costs with cardholder benefits such as rewards programs and fraud protection. Visa and Mastercard continue to emphasize security and efficiency as essential elements of the payment ecosystem as regulators push for more equitable fee structures.

‍

Payment Solutions with Kubera Payments

At Kubera Payments, we help businesses across North America move millions of dollars daily, whether in-store, online, or on mobile.

Our team of payment experts is here to guide you through the complexities of payment processing, ensuring your transactions are secure, reliable, and PCI-compliant. We have strong relationships with a wide network of acquirers and technology partners to help you implement the right front-end and back-end solutions for growth.

Get expert advice on optimizing your payments.

Contact our team at sales@kuberapayments.com or 604-484-9278.

‍

‍