Visa, Mastercard agree to settlement limiting swipe fees

Ah, 2005. Star Wars: Episode III—Revenge of the Sith was out in theaters, fashions were…questionable, and a group of merchants sued Visa and Mastercard over swipe fees.

Now, nearly twenty years later, and after much legal wrangling, the credit card giants, along with a group of large banks that issue credit cards, have finally acquiesced to a settlement. The agreement, which still needs to be approved by a federal judge, will lower rates by 0.04 percentage points for three years, and cap them at a rate seven basis points lower than current average until 2030.

Swipe fees, also called interchange fees, are fees merchants pay when customers use credit cards. They typically total around 2% of a transaction, according to the National Retail Federation, though they can reach as high as 4%. Merchants usually pass that cost on to consumers.

Mastercard, Visa, and the banks involved in the settlement earned $72 billion in swipe fees in 2023, the Wall Street Journal reported. The settlement will save merchants and consumers an estimated $30 billion over five years.

It will also give merchants greater flexibility over which cards they accept, and will remove the “anti-steering” provisions that prevented them from directing customers toward cards with lower fees.

But some retail advocates are disappointed by the settlement. Stephanie Martz, the National Retail Federation’s chief administrative officer and general counsel, told CNN that it would amount to no more than “pennies on the dollar.” And as Doug Kantor, general counsel of the National Association of Convenience Stores, told the Wall Street Journal, the settlement doesn’t get to the heart of the matter: allegations that credit card companies collude with banks to set fees.