US judge approves Visa, Mastercard $38B swipe fee settlement

Every time you tap your card at a coffee shop, the merchant pays a small percentage to Visa or Mastercard. Multiply that by billions of transactions, and you get one of the most profitable toll booths in modern finance. A federal judge just decided those tolls need to come down.

On June 9, a Brooklyn federal court granted preliminary approval to a revised $38 billion class-action settlement between Visa, Mastercard, and millions of US merchants. The deal resolves antitrust claims that have been grinding through the legal system for over two decades.

What the settlement actually changes

The settlement includes a 0.1 percentage point reduction in swipe fees over five years. Standard US consumer credit card interchange rates will be capped at 1.25% for eight years. For context, average swipe fees currently sit at approximately 2.35%.

Merchants will now have the right to decline certain high-fee Visa and Mastercard-branded cards. They can also impose surcharges on specific transactions. This represents a meaningful departure from the longstanding “honor all cards” policy, which required merchants to accept every card bearing the Visa or Mastercard logo regardless of how expensive it was to process.

The hearing that led to the approval took place on April 27. Final court approval is expected later in 2026, though appeals could delay implementation further.

A long road to get here

The litigation alleging anticompetitive practices by Visa and Mastercard has stretched across more than twenty years. A previous proposal valued at $30 billion was rejected by Judge Margo Brodie in June 2024. At the time, the projected annual merchant savings of $6 billion were labeled “paltry” by the judge. The revised deal bumps the total to $38 billion, an increase of roughly 27%, with additional structural concessions that the prior version lacked.

Merchant coalitions continue to push back, arguing the settlement still doesn’t adequately address centralized fee-setting by the card networks. When average fees are 2.35% and the reduction is 0.1 percentage points, the math doesn’t feel like justice after two decades of litigation.

Visa and Mastercard don’t technically set the fees themselves. Banks that issue the cards do, using the networks’ published rate schedules. Critics argue this distinction is largely cosmetic, creating a system where fees are effectively coordinated without anyone technically being “in charge.”

What this means for investors

For Visa and Mastercard shareholders, the settlement removes a cloud of legal uncertainty that has hovered over both companies for years. The fee cap at 1.25% for eight years creates a ceiling that investors can model against. The bigger question is whether this settlement emboldens regulators or legislators to pursue further interchange reform. The Credit Card Competition Act, which has been floating around Congress, would require banks to offer merchants a choice of at least two card networks for routing transactions.

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