By saumi March 6, 2025
For years, businesses have struggled with high credit card processing fees, feeling stuck with little control over the costs. Now, a major settlement with Visa and Mastercard is set to bring some relief—but with strings attached. While the agreement promises lower interchange fees, more flexibility in payment choices, and new surcharge rules, these changes won’t last forever. This article breaks down what the settlement means for businesses, what’s changing, and what to watch out for in the years ahead.
Understanding the Payment Card Interchange Settlement
If you had option for Visa or Mastercard payments between January 1, 2004, and January 25, 2019, you may be eligible for a share of the $5.5 billion from the class-action lawsuit against these payment networks. The final payout amount will depend on various factors, including legal fees, administrative costs, and the number of businesses that opted out of the settlement.
To qualify, your business must have processed credit card transactions during the covered period and must not have opted out by the July 23, 2019, deadline. If you were identified as part of the settlement, you should have received a form. However, if you didn’t, you can still sent claim by sending the Taxpayer Identification Number (TIN) on the official Payment Card Settlement website.
The amount you receive will be based on the interchange fees your business paid relative to all valid claims submitted. The deadline for claim submissions is May 31, 2024, and payments are expected to begin afterward, pending final court approval. The exact timing and payout amounts will depend on the number of claims received and the processing timeline.
Credit Card Companies’ Role in the Interchange Fee Settlement
Visa, Mastercard, and major banks have long held a dominant position in the credit card processing world, particularly when it comes to interchange fees—also known as swipe fees. These fees, which merchants pay every time a customer uses a credit card, have been a growing source of frustration for businesses, as they add up quickly and cut into already tight profit margins.
At the heart of the legal battle is the accusation that Visa, Mastercard, and big banks like Bank of America, Citigroup, and JPMorgan Chase colluded to set these fees at inflated rates, leaving merchants with little to no room for negotiation. These fees are designed to cover the cost of processing transactions, but merchants argue that they’ve been unfairly high, serving more as a revenue stream for financial institutions than a necessary cost of doing business.
For many small businesses, swipe fees rank as one of their biggest expenses, right behind rent and payroll. Since these fees are built into the cost of doing business, they often lead to higher prices for consumers as well. Meanwhile, banks and credit card companies use this revenue to fund perks like cashback rewards and travel points, which help attract more card users.
This ongoing debate over swipe fees has fueled years of legal battles, with merchants pushing for lower rates and more transparency, while financial institutions fight to protect a lucrative revenue stream. The outcome of these lawsuits could have lasting effects on the way businesses accept payments and how consumers use credit cards in the future.
How the Mastercard and Visa Settlement Could Impact Businesses
The recent settlement in the class-action lawsuit against Visa and Mastercard could have significant implications for businesses that accept credit card payments. At the heart of this case were interchange fees—also known as “swipe fees”—which merchants have long argued were set unfairly high, cutting into their profits and limiting their ability to offer cost-saving alternatives to customers.
These fees, which are paid by businesses every time a customer uses a credit card, have been a major source of revenue for card issuers—reaching a staggering $72 billion for Visa alone in 2023. With merchants having little bargaining power in this “take-it-or-leave-it” system, the costs were often passed on to consumers in the form of higher prices.
This settlement offers some financial relief, but businesses should consider both the short-term benefits and the long-term impact. The compensation from the lawsuit will provide businesses with partial reimbursement for the interchange fees they’ve paid over the years. However, the bigger question remains: will this lead to meaningful change in how interchange fees are structured moving forward?
If the settlement encourages more competitive pricing and greater flexibility for merchants, it could be a step toward fairer transaction costs. On the flip side, any reduction in interchange fees could affect the perks that consumers have come to expect, such as cashback rewards and travel points, potentially shifting customer spending habits.
The Future of Payment Card Interchange Fees Post-Settlement
The recent settlement between Visa, Mastercard, and merchants represents a major shift in how credit card processing fees are handled. While the agreement offers businesses some relief by reducing interchange rates and providing more flexibility in payment acceptance, it also raises questions about long-term implications and the future of merchant fees.
Lower Interchange Fees, But For How Long?
One of the key outcomes of this settlement is the commitment from Visa and Mastercard to reduce interchange fees by 7 basis points for a period of five years, starting in April 2025. Additionally, an immediate 4 basis point reduction will be applied to most credit card transactions, remaining in effect for at least three years.
While this offers businesses some financial relief, it’s important to recognize that these reductions are temporary. After the five-year cap expires, Visa and Mastercard could potentially raise fees again. Moreover, the settlement allows them to negotiate individual interchange rate agreements with merchants, meaning larger businesses may have more leverage to secure better deals while smaller businesses could struggle to keep rates low.
More Control Over Payment Choices
Merchants have long pushed for more flexibility in guiding customers toward cost-effective payment methods. Under the settlement, businesses will now be able to steer customers toward preferred payment options without having to apply the same strategy across all locations. This newfound control extends to digital wallets as well, allowing merchants to decide which wallets they accept, provided they follow specific guidelines.
Additionally, the “Honor All Wallets” rule will be modified, giving merchants the ability to reject certain digital wallets while still accepting Visa or Mastercard cards through traditional means. However, merchants must notify Visa and Mastercard in writing and in advance if they choose to decline a specific wallet.
Surcharging Becomes More Flexible
For businesses that impose credit card surcharges to offset processing costs, the settlement introduces new surcharge rules. Previously, Visa and Mastercard required merchants to maintain uniform surcharges across all card brands, but the settlement removes this restriction. Now, businesses can impose surcharges up to 1% without restrictions or up to 3% if applied equally to competitors like American Express and Discover.
The agreement also prevents Visa and Mastercard from penalizing merchants who choose to surcharge, ensuring businesses have greater control over how they manage processing fees. However, businesses must continue following strict disclosure and notification rules when implementing surcharges.
More Negotiating Power for Merchants
A major win for merchants is the ability to form Merchant Buying Groups, which will allow businesses to negotiate better terms collectively rather than on an individual basis. Visa and Mastercard are required to engage in good faith negotiations with these groups, giving businesses a stronger voice in determining interchange rates, fees, and other transaction-related costs.
While this could benefit merchants by creating more competitive pricing structures, its effectiveness will depend on how actively businesses participate and whether Visa and Mastercard are willing to offer meaningful concessions.
Education Program to Help Merchants Navigate the Changes
To help businesses understand these new rules, Visa and Mastercard will fund a Merchant Education Program with $15 million dedicated to guiding merchants through the changes. This program will cover key updates, how businesses can benefit from the rule modifications, and strategies for managing payment processing costs effectively.
A Trade-Off: Temporary Relief, But No Future Legal Challenges
One controversial aspect of the settlement is that it bars future lawsuits related to interchange fees. This means that while businesses receive immediate relief, they lose the ability to challenge swipe fees in court down the line. This could be a concern if Visa and Mastercard raise fees again after the settlement period ends.
Conclusion
This settlement marks an important step in addressing long-standing concerns over interchange fees, offering businesses some cost savings, greater flexibility, and more negotiating power. However, with temporary reductions and restrictions on future legal action, businesses must carefully consider their long-term payment strategies.
For small businesses in particular, forming buying groups, leveraging new surcharge rules, and taking advantage of education programs will be crucial to maximizing the benefits of this settlement. While the agreement doesn’t solve all the issues surrounding credit card processing fees, it does provide merchants with new tools to navigate an evolving payment landscape.
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