Visa and Mastercard agree to $30 billion settlement that will lower merchant fees
Two of the world’s largest credit
card networks, Visa and MasterCard, as well as the banks that issue cards with
them, agreed to settle a decadeslong antitrust case brought upon by
merchants.The settlement is set to lower swipe fees merchants pay when customers
make purchases using their Visa or Mastercard by $30 billion over five years,
according to a press release announcing the settlement Tuesday morning.The
settlement, which only applies to US merchants, is the result of a lawsuit
filed in 2005. However, nothing is considered finalized until it receives
approval from the US District Court for the Eastern District of New York. Even
then, the case can also be appealed in what could be a lengthy battle.Typically
swipe fees cost merchants 2% of the total transaction a customer makes but can
be as much as 4% for some premium rewards cards, according to the National
Retail Federation. The settlement would lower those fees by at least 0.04
percentage point for a minimum of three years. Additionally, the settlement
would require Visa and Mastercard to maintain the swipe fee rates that existed
as of December 31, 2023 for five years.NRF, a trade group representing
retailers, told CNN it has“some very real concerns” with the settlement.
The reduced swipe fees resulting
from the settlement are within the range that they’ve fluctuated over the years
and “amounts to pennies on the dollar,” NRF’s chief administrative officer and
general counsel, Stephanie Martz, said in a statement.“The fact remains that
these fees are an unfair business practice that harms merchants and consumers
and benefits banks,” he added.
How cardholders will be impacted
: Although merchants have long argued that swipe fees force them to charge
higher prices, the settlement that would lower those fees, would not
necessarily save consumers any money.That’s because the settlement gives
merchants the ability to impose surcharges on customers who have Mastercard or
Visa cards that allow them to rack up rewards such as cash back and airline
miles.On the other hand, some cardholders could get discounts on goods and
services since merchants would be able to make deals with banks to get them to
use what they consider to be a preferred card.
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