In a pivotal move that could reshape the U.S. payments landscape, Visa Inc. and Mastercard Inc. have announced a revised settlement agreement valued at approximately $38 billion to resolve long-standing disputes with merchants over credit card interchange fees. The deal, unveiled on November 10, 2025, comes after a federal judge rejected a previous $30 billion accord in June 2024, deeming it insufficient. This new proposal aims to address merchants’ grievances by reducing swipe fees and granting retailers greater flexibility in card acceptance, potentially saving businesses billions while raising questions about the future of consumer rewards programs.

The litigation, which dates back nearly two decades, stems from accusations that Visa and Mastercard violated antitrust laws by fixing interchange fees—the charges merchants pay to process credit card transactions. These fees, often around 2% to 3% of each transaction, have been a sore point for retailers, who argue they inflate costs passed on to consumers. According to Reuters, the revised settlement includes a commitment to lower average U.S. credit interchange rates by at least 4 basis points for three years, followed by a further reduction of 7 basis points below 2011 levels for an additional two years.

Merchants would also gain the ability to surcharge certain premium cards and steer customers toward cheaper payment options, a flexibility previously restricted by network rules. This could empower small businesses to reject high-fee cards like Visa Infinite or Mastercard World Elite, which offer lucrative rewards but come with higher processing costs. As reported by Bloomberg, the agreement seeks to end a legal saga that has cost the card networks billions in legal fees and settlements over the years.

A Two-Decade Legal Battle

The origins of this dispute trace back to 2005, when a group of merchants filed a class-action lawsuit in the Eastern District of New York, alleging anticompetitive practices by Visa and Mastercard. The case has seen multiple twists, including a 2012 settlement that was partially overturned by an appeals court in 2016. A subsequent $5.6 billion deal in 2018 addressed some claims, but the core interchange fee issues persisted, leading to the 2024 proposal that U.S. District Judge Margo Brodie rejected for not adequately compensating smaller merchants.

In her ruling, Judge Brodie criticized the earlier accord for failing to provide meaningful relief, prompting Visa and Mastercard to sweeten the pot. The new terms, as detailed by CNBC, include not only fee reductions but also enhanced transparency and education for merchants on payment routing options. This is expected to benefit over 90% of U.S. merchants, particularly in sectors like retail and hospitality where card payments dominate.

Industry analysts view this as a strategic retreat by the card giants amid mounting regulatory pressure. The Credit Card Competition Act, pending in Congress, seeks to introduce more competition in payment routing, potentially eroding Visa and Mastercard’s duopoly. Fox Business notes that the settlement could preempt harsher legislative measures, providing a five-year window of stability for the networks.

Impact on Retailers and Small Businesses

For U.S. merchants, the settlement represents a hard-won victory. Retailers have long complained that interchange fees eat into slim profit margins, with the National Retail Federation estimating annual costs exceeding $100 billion industry-wide. Under the new deal, merchants could save an estimated $30 billion over five years, per calculations from law firms representing the plaintiffs.

Small businesses stand to gain the most, as they often lack the negotiating power of large chains like Walmart or Amazon. The agreement allows for more granular control over card acceptance, enabling stores to decline premium cards without rejecting all Visa or Mastercard products. As Javier David explained on CBS News, this could lead to a ‘slow lowering of interchange fees,’ potentially translating to lower prices for consumers if savings are passed along.

However, not all merchants are celebrating. Some trade groups, including the Merchants Payments Coalition, have voiced opposition, arguing the reductions are too modest and temporary. Reuters reports that critics like the Retail Industry Leaders Association believe the deal falls short of addressing systemic issues in the payments ecosystem.

Consumer Rewards at Risk

One of the most debated aspects of the settlement is its potential ripple effects on credit card rewards programs. High-interchange premium cards fund generous perks like cash back, travel points, and lounge access, which have surged in popularity. The Points Guy warns that if merchants start rejecting these cards to avoid fees, issuers like Chase and American Express might scale back rewards to maintain profitability.

Posts on X (formerly Twitter) reflect consumer anxiety, with users like Sheel Mohnot noting that the ‘honor all cards’ rule’s relaxation could signal ‘your rewards card dying a slow death.’ CNN Business echoes this, suggesting that while merchants save on fees, consumers might see diminished incentives, potentially shifting spending habits toward debit or cash.

Yet, proponents argue the changes promote fairness. By allowing merchants to surcharge or steer, the settlement could foster competition, encouraging networks to innovate rather than rely on high fees. American Banker highlights that the deal includes provisions for Mastercard and Visa to invest in merchant education, helping businesses optimize payment processing.

Broader Economic Implications

The timing of the settlement aligns with economic headwinds, including softening consumer sentiment as indicated by the University of Michigan index at 50.3 in recent readings. With holiday spending projected to rise modestly, retailers are eager for any cost relief. ABC News reports that the proposal ‘eases US merchant pressures’ amid these conditions, potentially boosting retail margins during peak seasons.

Globally, this U.S.-centric deal could influence international markets. In Europe, where interchange fees are capped at 0.3% under EU regulations, Visa and Mastercard have adapted by focusing on value-added services. Finextra suggests the settlement might prompt similar reforms elsewhere, pressuring networks to diversify revenue beyond transaction fees.

Wall Street’s reaction has been mixed. Visa shares dipped slightly on the announcement, while Mastercard held steady, reflecting investor views that the settlement averts worse outcomes. SEC filings from Mastercard, as shared on X, confirm the agreement’s focus on providing ‘clarity for merchants’ through rate reductions and flexibility.

Path to Approval and Future Uncertainties

The settlement now awaits preliminary approval from Judge Brodie, with a hearing expected in early 2026. If greenlit, changes could take effect by late 2026 or early 2027, according to Fox Business. However, opposition from some merchant groups could lead to opt-outs or further litigation, prolonging uncertainty.

Experts like those at Retail Systems emphasize that the deal gives retailers ‘more control over which card types they accept,’ potentially fragmenting the payments market. This could accelerate adoption of alternative payment methods, such as buy-now-pay-later services or digital wallets like Apple Pay, which often bypass traditional interchange fees.

Looking ahead, the settlement underscores the evolving dynamics of the $8 trillion U.S. card payments industry. As Brendan Pedersen noted on X, this follows a pattern of incremental reforms, but true disruption may come from fintech innovators challenging the status quo. For now, Visa and Mastercard’s concession marks a significant, if temporary, win for merchants in a battle that’s far from over.