Payment Giants to Slash Interchange Fees by 0.1% and Easing “Honor All Cards” Rules, Aiming to Resolve Two Decades of Antitrust Litigation.
Visa and Mastercard are reportedly on the verge of finalizing a landmark settlement with U.S. merchants that promises a meaningful reduction in the high interchange fees (or “swipe fees”) they pay for credit card transactions. Citing sources familiar with the matter, the Wall Street Journal indicates the deal will not only trim these fees by an average of about 0.1 percentage point over several years but will also grant merchants significant new power to reject specific types of credit cards, directly challenging long-standing network rules. This resolution, which is expected soon pending court approval, would finally conclude a major legal battle stretching back to 2005 and fundamentally reshape payment processing costs across American retail.
The Core Concessions: Lower Fees and Greater Flexibility
The proposed terms represent a significant win for merchants, who have long accused the payment networks and associated banks of anticompetitive behavior. The key components under discussion include:
- Interchange Fee Reduction: Visa and Mastercard are expected to lower the interchange fees, which currently average 2% to 2.5% per transaction, by an average of roughly one-tenth of a percentage point over a defined period. This follows a previous, potentially court-rejected agreement from last year that aimed for a smaller reduction of 0.07 percentage points over five years.
- Card Acceptance Flexibility: The settlement would ease the restrictive “anti-steering” rules. Currently, if a merchant accepts one type of credit card from a network (like a Visa rewards card), they must generally accept all credit cards from that network. The new structure would allow for categorization, potentially dividing acceptance by card type—such as rewards cards, non-rewards cards, and commercial cards. This would enable merchants to selectively decline higher-fee cards.
- Surcharging: The deal is also expected to address surcharging, the practice of adding a fee to a customer’s bill when they pay with a credit card, which merchants have long sought to clarify and utilize as a cost recovery tool.
A Long Battle for Control Over Payment Flows
This new agreement targets the core complaint of merchants: the high cost and lack of choice in card acceptance. The legal fight highlights the intense pressure on merchants to direct customers toward cheaper payment methods, a practice long restricted by the networks. While the payment giants denied wrongdoingin agreeing to settle, the negotiation pressure is evident, particularly given the previous settlement attempt last year—valued at an estimated $30 billion—that faced further judicial scrutiny.
For the global finance industry, this is a crucial event. Lower interchange fees directly reduce operating expenses for merchants, potentially translating into lower consumer prices or higher retailer margins. The greater control over card acceptance also opens the door for merchants to negotiate more favorable terms with specific issuing banks or even favor alternative payment rails. The final approval from the court will set a definitive standard for credit card acceptance rules in the U.S. for the coming years.
