Key Points
- Visa and Mastercard have settled a 20-year lawsuit with retailers over credit card fees. The deal will lower interchange fees by 0.1% over five years.
- Merchants will be allowed to add surcharges for credit card payments.
- Retailers will also have the option to refuse premium credit cards with higher fees.
- The settlement could lead to lower prices but may also threaten consumer rewards programs.
Visa and Mastercard have finally reached a deal with retailers to lower the fees merchants pay when customers use credit cards. This settlement could lead to lower prices for consumers but might also put popular credit card rewards programs at risk.
For the past two decades, the credit card giants have been locked in a legal battle with retailers. The retailers claimed that Visa and Mastercard illegally set the price of “interchange fees”—the fees charged by card issuers every time a customer swipes a credit card. A previous $30 billion settlement was proposed last year, but a federal judge rejected it, extending the long-running dispute.
Under the new proposal, Visa and Mastercard would reduce interchange fees by 0.1% over the next five years. More importantly for consumers, the deal would give merchants the choice to add a surcharge when customers pay with credit cards. It would also let them refuse to accept certain premium cards, which often come with much higher fees for the business.
Retailers have long complained about these fees. According to the National Association of Convenience Stores, the fees merchants pay when customers use their cards have jumped by nearly 70% since the start of the COVID-19 pandemic., This new deal, which still needs a judge’s approval, could bring significant changes for both businesses and shoppers.
Both credit card companies framed the settlement as a positive step. Visa told CNN that the deal would provide “meaningful relief, more flexibility and options” for merchants. Mastercard added that “smaller merchants will gain in this settlement – more acceptance choices, reduced costs, and simplified rules.”
