Visa, Mastercard US$38 billion swipe fee settlement wins U.S. judge’s approval

Visa and Mastercard credit cards are shown in Buffalo Grove, Ill., Feb. 8, 2024. (AP Photo/Nam Y. Huh, File)

NEW YORK — A U.S. judge granted preliminary approval to Visa’s and Mastercard’s revised $38 billion settlement with merchants who accused the card networks of charging too much to process payments on their credit cards.

U.S. District Judge Brian Cogan in Brooklyn, New York, said the settlement covering more than 12 million merchants was “fair, reasonable, and adequate,” and thathe was likely to eventually grant final approval.

Cogan ruled on Tuesday, nearly two years after a different judge rejected a proposed $30 billion settlement as too small. Some groups including the National Retail Federation, the world’s largest retail trade group, also opposed the new settlement and plan further challenges.

The settlement announced in November was intended to end litigation that began in 2005, when merchants accused Visa, Mastercard and banks of conspiring to violate U.S. antitrust laws, including through the collection of “swipe fees.”

SWIPE FEES WOULD BE CUT

Also known as interchange fees, swipe fees totaled $118.8 billion for Visa and Mastercard in the United States in 2025, up from $111.2 billion in 2024 and $25.6 billion in 2009, the Merchants Payments Coalition said. The average fee was 2.36 per cent.

Visa and Mastercard agreed to lower swipe fees by 0.1 percentage point for five years, while standard consumer rates would be lowered to no more than 1.25 per cent for eight years.

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Merchants could also choose whether to accept cards in distinct categories: commercial cards, premium consumer cards — including the popular rewards cards that dominate the card market — and standard consumer cards.

That provision would effectively end the longstanding “Honor All Cards” rule requiring merchants to accept all Visa and Mastercard cards or none. Merchants also got more options to impose surcharges on customers.

Visa shares rose 1.7 per cent on Tuesday while Mastercard shares rose 2 per cent.

MORE OBJECTIONS PREDICTED

In separate statements, the National Retail Federation and the National Association of Convenience Stores said the revised settlement failed to address a “broken” credit card market, and NACS General Counsel Doug Kantor predicted “many more objections” will be filed.

Objectors said merchants would still pay too much to accept rewards cards and be required to “honor all issuers” in a given network, meaning they could not accept one bank’s cards and reject another’s.

Cogan said many objections had merit, but the settlement didn’t need to be perfect.

“The objectors identify several things that they want to do but can’t (e.g., rejecting cards at the issuer-level, surcharging at the issuer-level) and that they theoretically can do but won’t (e.g., rejecting premium cards),” he said. “But the question is not whether the amended settlement constitutes the best possible recovery, end stop – it’s whether the amended settlement constitutes the best possible recovery in light of what can be gained and lost through trial.”

Other objectors included Walmart WMT.O and the Merchants Payments Coalition. Neither immediately commented.

NOBEL ECONOMIST SAYS CONSUMERS COULD BENEFIT

The card networks welcomed Cogan’s decision.

Visa said the settlement gives merchants more flexibility in accepting payments, while Mastercard said the accord “balances the interests of all parties.”

Supporters of the settlement included the Electronic Payments Coalition, whose members include the card networks and large issuers such as Bank of America BAC.N, Capital One COF.N, Chase JPM.N and Citibank C.N.

Two experts hired by the plaintiffs, Nobel Prize-winning economist Joseph Stiglitz and University of Washington professor Keith Leffler, said the changes could save merchants $38 billion by 2031 and provide $224 billion of benefits overall, including to consumers.

The $30 billion settlement would have lowered swipe fees by 0.07 percentage point over five years and also allowed more surcharges.

In rejecting that accord in June 2024, U.S. District Judge Margo Brodie said fees would have still been above where they were absent any antitrust violations, and merchants would remain stuck with the “Honor All Cards” rule.

(Reporting by Jonathan Stempel in New York. Editing by Aurora Ellis, Bill Berkrot and Mark Potter)