Visa and MasterCard agreement

Visa and MasterCard Reach Agreement to Put a Cap on Swipe Fees in a Settlement

Posted: April 8, 2024 | Updated: May 14, 2024

March 26th marked a significant day for the merchants as Visa and MasterCard reached a landmark agreement involving nearly a $30 billion settlement. This settlement aims to significantly lower merchants’ credit and debit card transaction costs by reducing US credit card interchange rates, commonly called swipe fees, for a minimum of five years.

Should this antitrust settlement receive court approval, it would be recorded as one of the largest in the US legal history, effectively putting to rest most of the disputes raised in a nationwide class-action lawsuit that began in 2005. This Visa and MasterCard agreement is undoubtedly a game changer for merchants and customers.

Key Takeaways
  • Reduction in Interchange Rates: Visa and Mastercard are set to lower and limit interchange rates for consumer and commercial credit transactions in the US, offering a direct reduction in costs for businesses. This marks an end to a two-decade-long battle, initially filed in 2005.
  • Five-Year Cap on Rates: This deal means that both MasterCard and Visa have decided to put a cap on the interchange rates for at least the next five years, which, from their perspective, will give merchants the much-needed assurance and predictability in the business expenses demanded by the merchants.
  • Enhanced Flexibility and Education: Merchants will now enjoy broader options at checkout, including adding surcharges and pushing for preferred payment methods. Additionally, the agreement promises funding towards educating small businesses on how to accept payments efficiently and manage costs effectively.
  • Industry Response and Ongoing Concerns: While the settlement has been approved by specific sectors of the industry, skepticism remains among others. Critics point out that the measures are a “temporary bandage,” failing to tackle the root issues with swipe fees head-on. A significant worry is the potential for fee hikes once the five-year period ends.

Visa and Mastercard Agreement: A Turning Point in US Merchant Fee Disputes

mastercard securecode

On March 26th, Visa and MasterCard announced that over two decades of ongoing legal battles with US retailers over the interchange fees charged by the payment giants had ended.

According to the agreement’s terms, Visa and Mastercard have decided to lower and set a maximum limit on the interchange fees they levy. This new arrangement also opens the door for small businesses to negotiate rates with these payment processing giants, a privilege that, until now, was mostly reserved for the more prominent players who had the leverage to negotiate on their own.

Here’s what the agreement includes:

  • Reduction in Interchange Rates: Both Visa and MasterCard had jointly agreed to lower and cap the already published and effective interchange rates for consumer and commercial credit transactions throughout the United States.
  • Cap on Interchange Rates: The agreement is valid for the next five years, within which both the processors will offer reduced credit interchange rates. This gives merchants the certainty they have long sought regarding costs.
  • Enhanced Cost Management Options: Merchants will have increased flexibility at the point of sale. This includes encouraging the use of preferred payment methods and more choices regarding surcharging. Additionally, the settlement allocates funding for new programs to educate small businesses on payment acceptance options and effective cost management strategies.

Swipe fees have small fixed charges plus a percent of the amount – usually around 1.5% to 3.5% per sale. Visa and Mastercard would decrease these fees by at least four basis points (0.04%) for three years. The rate would stay basis points lower than the current average for five more years. Both the card networks agreed to cap rates and remove anti-steering provisions. So now merchants can offer discounts or add surcharges on higher-cost cards. And they’ll explain to shoppers why some cards — often business or rewards cards — cost more to process.

Robert Eisler, the co-lead attorney for the plaintiffs, said all US merchants would get significant cost cuts from this deal, which also achieves their goal of eliminating anti-competitive barriers.

Kim Lawrence, Visa North America’s president, stated that through direct negotiations with merchants, they’ve achieved a settlement that includes significant accommodations targeting the specific challenges identified by small businesses.

Rob Beard, the chief legal officer, general counsel, and head of global policy at Mastercard, remarked that this agreement concludes a prolonged disagreement, offering business owners considerable benefits and certainty, including the flexibility in managing card program acceptance.

Assessing the Settlement’s Impact on Swipe Fees: Industry Responses and Ongoing Concerns

While some industry groups representing retailers of all sizes welcomed the settlement as a step in the right direction, they emphasized that more action is needed to address the ongoing issue of swipe fees. They pointed out that the reduced fees would only be in effect for a limited period, ranging to five years, after which they would revert to their current levels.

Some major companies, like Starbucks Corp., Target Corp., Crate & Barrel, and Foot Locker Inc., remain skeptical about the settlement’s effectiveness. They had previously opted out of a $5.6 billion class action settlement with the card companies to pursue their case. These companies plan to proceed to trial, alleging that Visa and Mastercard colluded on fees, especially after a federal judge rejected the card companies’ attempt to halt the litigation.

However, unlike before, they cannot opt out of the March 26 proposal, which primarily focuses on injunctive relief rather than monetary compensation. Merchants that chose to suit independently and opt out of the $5.6 billion settlement do not have their damages claims resolved by this settlement.

The Retail Industry Leaders Association, representing businesses employing over 42 million Americans, stated that while the settlement merits further examination, it’s seen as just the starting.

According to Doug Kantor, a member of the Merchants Payments Coalition‘s executive committee, the proposed settlement needs to be revised for merchants. Despite an expected $30 billion in savings over five years, US businesses paid over $170 billion in swipe fees just last year. Based in Washington, DC, the coalition advocates for payment market competition.

Visa and Mastercard will retain the authority to determine the prices for swipe fees charged to merchants with each customer transaction. Plus, nothing prevents these companies from increasing these fees again once the five-year period elapses.

Merchants are also concerned about their ability to encourage customers to use preferred cards that incur lower fees, especially when larger retailers might still accept all types of cards, even those with higher interchange fees, such as Visa Infinite or Chase Sapphire Reserve. The suggested settlement shifts the responsibility to merchants to motivate customers to opt for alternative payment methods.

The plaintiffs’ lawyers stated that Visa and Mastercard have agreed to cover up to $170 million in legal fees and expenses. Additionally, certain U.S. senators have endorsed the Credit Card Competition Act, which aims to allow merchants to process Visa and Mastercard credit cards through alternative payment networks.

About Visa

visa card

Visa is a global financial services corporation based in the United States, specializing in electronic payment systems worldwide. It manages a vast network for electronic payments, enabling the exchange of money and information across banks, merchants, consumers, businesses, and governmental bodies.

In addition to facilitating electronic transactions, Visa offers services to enhance online payment security and manage risks for e-commerce merchants. It provides transaction services for digital goods within online gaming, digital media, social networking platforms, and mobile financial solutions catering to mobile operators and banks in emerging markets.

The company’s portfolio includes well-known payment brands such as Visa, PLUS, Interlink, and Visa Electron, which support various payment methods, including credit, debit, prepaid, and commercial programs, accessible in over 200 countries and territories. Through its global network, VisaNet, Visa also offers advanced processing services, including fraud prevention, risk management, dispute resolution, rewards programs, and other services that support business operations.

About MasterCard


Mastercard is a leading technology firm that delivers payment solutions encompassing credit, debit, prepaid, and commercial card programs. Additionally, the company extends its expertise to provide cyber and intelligence services. Collaborating with financial institutions, Mastercard facilitates the processing of electronic payments for merchants. Unlike issuing cards directly, Mastercard’s revenue model is based on collecting fees from the Gross Dollar Volume (GDV), representing the cumulative transactions made with Mastercard-branded cards.

The company forges partnerships with many institutions globally, bridging various stakeholders across diverse transaction types. Mastercard-branded cards, issued by participating banks and adorned with their logo, are recognized for their open-loop system. This system ensures that the cards are accepted universally at all locations where Mastercard’s services are available.


The recent settlement between Visa and Mastercard, potentially resolving nearly two decades of legal disputes with US merchants, marks a significant milestone in the ongoing saga of swipe fees. With a proposed reduction and cap on interchange rates, alongside provisions for enhanced cost management options, this agreement promises substantial cost reductions for merchants, particularly small businesses.

While some industry stakeholders have welcomed the settlement as a positive step, concerns linger about the temporary nature of the fee reductions and the potential for fees to increase again after the five-year period. Approval of this settlement may provide relief and certainty to merchants nationwide, addressing long-standing grievances and setting a precedent for future negotiations in payment processing.

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