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Visa and Mastercard have reached a significant settlement with U.S. merchants, aiming to resolve a legal battle that has spanned nearly two decades over credit card interchange fees, often called "swipe fees." The agreement, which still requires judicial approval, introduces substantial changes to the card networks' rules, potentially altering the dynamics between merchants, card issuers, and consumers.
The core of the settlement focuses on providing merchants with greater flexibility and control over payment acceptance. A key provision will allow businesses, for the first time, to reject specific high-fee credit cards, particularly premium rewards cards, without being forced to decline all cards from that network. This change directly addresses a long-standing merchant complaint that they are compelled to accept expensive cards to maintain access to the Visa and Mastercard networks. The agreement also formalizes merchants' ability to "steer" customers toward lower-cost payment options.
In addition to these rule changes, the settlement includes a monetary component. Visa and Mastercard will lower their posted interchange rates and commit to capping them for a set period. This measure is intended to provide immediate and lasting relief to merchants, who have argued that the continuously rising fees, which totaled over $100 billion in 2023, place an unfair burden on their operations and lead to higher prices for consumers. Full details of the new swipe fee settlement with merchants outline these concessions.
This agreement could have a profound impact on the highly lucrative credit card rewards market in the United States. If merchants begin to selectively refuse high-reward cards due to their associated costs, the value and appeal of these cards for consumers may diminish. The historic settlement conditions signal a potential shift in how credit card perks are funded and offered. While proponents see the deal as a step toward a more competitive market, some merchant groups have already voiced opposition, suggesting the concessions may not go far enough to dismantle what they describe as a duopoly. This settlement between card companies and US businesses follows years of litigation and previous failed agreements.
