Visa Mastercard Interchange Fee Settlement: The $38 Billion Deal That Could Change How You Pay

The majority of consumers will never read the paperwork that lawyers filed in a federal courthouse on a gloomy Monday morning in Brooklyn, but it subtly changed how Americans might swipe their credit cards at the grocery store the following year. After twenty years of litigation, countless appeals, and one judge, Margo Brodie, who sent the case back to the drawing board in June 2024, the revised $38 billion settlement between Visa, Mastercard, and U.S. merchants was reached. Many in the payments industry were taken aback by her rejection of the previous $30 billion deal. It shouldn’t have. She was serious when she said that the merchants weren’t receiving enough.

It seems like this battle has been going on for so long that the majority of the initial plaintiffs have either retired, moved on, or sold their companies. The settlement period began in 2004, when swipe fees were a quiet line item that no one publicly debated and the iPhone did not yet exist. Interchange fees have increased fourfold since then, from about $25 billion in 2009 to $111.2 billion last year. If you walk into a family diner in Phoenix or a corner store in Chicago, the owner will tell you—usually without being asked—that the cost of processing credit cards now exceeds their rent.

According to the new agreement, standard consumer card rates will be capped at 1.25% for eight years and average swipe fees will be reduced by a tenth of a percentage point for five. On paper, that sounds modest. In actuality, it adds up for a restaurant that makes $2 million annually. However, this is where things get complicated and retailers start to react negatively. The new terms would allow merchants to accept plain vanilla cards but reject certain types of cards, such as corporate, business, and premium rewards cards.

You can’t simply reject more than 80% of your customers’ cards without losing business, according to Stephanie Martz of the National Retail Federation. She’s not incorrect. The market for rewards cards is huge, and many middle-class consumers use the 2% cash back on groceries as part of their monthly budget rather than as a perk. If the settlement is upheld, Odysseas Papadimitriou, the CEO of WalletHub, anticipates two outcomes: some merchants will start charging surcharges of up to 3% to use premium cards, and some premium cards will start to be declined at checkout. Imagine being told courteously that they would prefer a debit card today when you pull out your favorite travel rewards card at a Brooklyn boutique.

It’s difficult to ignore the irony. Smaller retailers are concerned that the savings are too small to matter and the confusion at the register is too costly to handle now that they may prevail in their 20-year battle for the right to oppose what they called a noncompetitive system. According to Nobel economist Joseph Stiglitz, who was employed by the plaintiffs, the more comprehensive changes could result in $224 billion in savings and unleash genuine payment competition. Perhaps. The figures are enormous and nearly intangible.

Nothing has changed as of yet. Even if Judge Brodie approves, the consequences won’t be felt until late 2026. Meanwhile, merchants who submitted claims prior to the February deadline are still receiving the $5.54 billion fund from the earlier settlement, albeit slowly. The checkout counter is going to feel different after twenty years of litigation. As you watch this happen, you get the impression that nobody is fully prepared for what will happen next—not Visa, not the retailers, and not the customers.