Visa and Mastercard have proposed a new settlement of a long-running legal battle over credit card “swipe fees” that could upend how you pay (and earn rewards) at checkout — or not.
Previous attempts at settling this decades-long dispute have fizzled in court, and this new proposal also faces legal hurdles and has detractors on both sides of the issue.
Here’s how it might affect you.
What is this settlement about?
It’s a proposal from Visa and Mastercard — the two largest credit card payment networks. Merchants have long argued that Visa and Mastercard are gouging them on the fees they must pay the networks to process card transactions. Those processing fees are known as interchange fees or “swipe fees.”
Sounds like their problem. Why should I care?
Under the proposal, merchants would pay lower interchange fees for a period of time. But it would also loosen rules around credit card surcharges. Some merchants already implement surcharges (a fixed percentage of your bill) to offset interchange fees, but this proposal would let them potentially charge you different fees depending on the kind of credit card you’re using.
Assuming you’re able to use the card at all, that is. You could see changes there, too.
How would it affect what cards I can use?
At the moment, under long-standing network rules, if a merchant accepts Visa cards, it must accept all Visa cards. Same with Mastercard. It can’t decide to, say, take “regular” Visa cards, but not Visa Signature or Visa Infinite cards. Those higher-tier cards typically offer higher rewards and more generous perks — and are thus more expensive for merchants to accept. (Rewards are largely funded by the interchange fees that merchants pay.)
Under this new proposal, though, that so-called “honor all cards” system would change. Merchants would be able to choose which kinds of credit cards to accept among three categories — commercial cards, standard cards (no rewards) and premium cards (rewards-earning cards).
“Smaller merchants will gain in this settlement — more acceptance choices, reduced costs and simplified rules,” Mastercard said in a statement.
Again, how does that affect me?
Well, if a merchant were to decide to accept standard Visas but not “premium” ones, you might not be able to use your fancy three-digit-annual-fee credit card there anymore. Or even your no-annual-fee card that pays a flat 1.5% cash back.
Sounds complicated — for me, but also for merchants (and cashiers)
Yeah, they’re not happy. Both the National Retail Federation and the Merchant Payments Coalition issued statements decrying the proposed settlement as inadequate.
“The card industry either just doesn’t get it or just doesn’t care,” said Stephanie Martz, the National Retail Federation’s chief administrative officer and general counsel, in a news release. “The reduction in swipe fees doesn’t begin to go far enough, and the change in the honor-all-cards rule would accomplish nothing.”
The proposal “ignores the fact that 85% of cards issued today are rewards cards and that merchants have no choice but to accept them,” added Jennifer Hatcher, a Merchant Payments Coalition executive committee member, in a statement. “Banks would likely also have the power to move cards into different categories, effectively forcing merchants to continue to take all cards and pay their high prices.”
Some major banks, too, are unhappy about the potential end of the “honor all cards” rule, according to The Wall Street Journal,
Wait, this sounds familiar
That’s because the payment networks tried settling this issue before, back in March 2024, but that proposal was struck down in court.
The dispute itself has been going on for 20 years.
That sounds exhausting. Can’t Congress get involved?
Some lawmakers are trying, by way of the Credit Card Competition Act, which supporters say would lead to lower interchange costs for merchants. But that’s not related to this settlement. And in any case, that legislation hasn’t moved meaningfully closer to passage since it was first proposed in 2022.
So do cardholders need to start panicking?
Not yet. The settlement must still be approved by a judge. And given the fate of the previous proposal and the general unhappiness with the new one from large merchant groups and banks alike, approval is far from certain.
