Visa, Mastercard Poised to Reshape Credit Card Merchant Fee Landscape With Historic Settlement

A landmark agreement between Visa, Mastercard, and U.S. merchants is on the verge of finalization, potentially ending a protracted legal struggle spanning two decades, according to Wall Street Journal sources. The breakthrough could fundamentally alter how retailers handle credit card transactions and the economics underlying merchant fees.

The Core Terms: What’s on the Table

The proposed deal centers on two major concessions. First, both payment networks would reduce interchange fees—the costs merchants bear per transaction, currently sitting between 2% and 2.5%—by approximately 0.1 percentage point across a multi-year rollout. Second, the restrictive “honor all cards” mandate would be relaxed, allowing merchants greater discretion in selecting which card types they process.

This flexibility represents a seismic shift. Rather than accepting every card variant offered by a network, retailers could decline high-fee reward cards in favor of non-reward or commercial alternatives. For consumers accustomed to earning points and cashback, this signals a potential narrowing of reward card acceptance at checkout.

Why This Matters for Consumers and Retailers

The practical consequences extend across multiple stakeholders. Merchants face immediate relief from processing costs that have squeezed margins, particularly for lower-ticket transactions. Simultaneously, reward card holders may encounter friction, as issuers would lose the guaranteed acceptance merchants currently must provide.

The merchant fee structure has long been a pain point for retailers, with interchange costs representing a significant operational expense. This settlement addresses those grievances while introducing new dynamics to consumer payment choice.

The Legal Timeline: A 20-Year Battle

The origins trace back to 2005, when merchants initiated claims alleging that Visa, Mastercard, and issuing banks conspired to maintain anticompetitive practices surrounding interchange fees and card acceptance mandates. A preliminary settlement attempted in March 2024 proposed a more modest 0.07 percentage point reduction over five years and expanded merchant surcharge rights, but the presiding judge rejected it as insufficient.

The current framework incorporates similar surcharge provisions while offering marginally steeper fee reductions, suggesting an evolution in negotiating positions. Court approval remains the final hurdle before implementation.

Market Implications

Should the settlement gain judicial blessing, the credit card ecosystem faces tangible restructuring. Payment networks and issuers will need to recalibrate reward structures, merchant relationships will enter new negotiations around acceptance requirements, and consumers may experience reduced acceptance of premium card products.

The resolution represents a rare instance of merchants securing meaningful leverage against entrenched payment giants, fundamentally reshaping the terms under which credit card merchant fees and acceptance practices operate.