Visa and Mastercard’s $38 Billion Swipe Fee Settlement Could Change What Merchants Pay
The two-decade long legal battle between Visa and Mastercard is looking like it’s nearing its end, after a federal judge granted a preliminary approval to a revised $38 billion settlement over credit card swipe fees.
The case was centered around claims that major banks and credit card issuers charged excessive credit card payment processing fees to merchants. These swipe fees have long been a sore point for many of the biggest retail businesses around the U.S., as they continue to represent one of their highest payment-related expenses in day-to-day operations.
With this revised settlement, Visa and Mastercard would agree to lower swipe fees by 0.1% for five years, while standard consumer credit card rates would also now be capped at 1.25% for the next eight years, giving more flexibility and freedom when it comes to surcharges and the categories of cards they accept.
Small business owners have now spent years and years battling these swipe fee costs, as many of these companies operate on thin margins and find it almost impossible to pass the payment processing costs on to their consumers.
However, even this revised deal leaves a lot to be desired, especially since under it, premium rewards card purchases would remain expensive for businesses to accept, as merchants are the ones who would still be paying much of the cost behind the rewards.
When it comes to consumers, they would not feel much impact, as lower fees could potentially help with merchants not raising their prices, but this is by no means a guarantee, and it is not something that should be expected to happen.
Right now, if this deal sees a final approval, it would be a major legal win for both Visa and Mastercard, albeit not a complete victory. The revised agreement from $30 billion in the 2024 proposal is larger, yes, and gives businesses more control, but even a settlement this large may not be enough to clearly settle the question of who really pays for credit card rewards.
I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.
