Visa and Mastercard have reached an agreement with merchants in a twenty-year-old lawsuit that, if approved, could reduce the amount of money businesses that accept credit cards pay in interchange fees, also known as “swipe fees.” It is expected to save businesses that accept credit cards at least $29.79 billion over the next five years.

Here are answers to common questions small business owners may have about the settlement.

What Is This $30 Billion Interchange Settlement About?

In 2005, merchants filed a lawsuit against Mastercard, Visa and financial institutions that issue payment cards. That lawsuit “alleged that merchants paid excessive fees to accept Visa and Mastercard credit cards, and that Visa and Mastercard and their member banks acted in violation of antitrust laws,” according to the statement issued by the law firm Hilliard Shadowen LLP.

If approved, this settlement will resolve that litigation. It affects merchants who accept Visa and Mastercard debit or credit cards in the United States at any time between December 18, 2020 and the date of entry of final judgment by the court.

What Does the Settlement Mean for Small Business Owners?

The settlement could reduce the rates that merchants pay when they accept Mastercard or Visa cards. Visa says that more than 90% of its customers are small business owners. It will: 

• Lower the published interchange rates for merchants in the US. 
• Cap the reduction in interchange rates for five years, and
• Give merchants that accept credit cards more options for assessing surcharges. 

Interchange rates vary based on a number of factors, including the type of merchant, whether a card is present at the place of purchase, and even by type of card (with premium cards garnering higher rates). 

Under the settlement terms, rates would be cut by four basis points, or 0.04%, for at least three years, and for five years, rates would not be raised above the rates posted as of  December 31, 2023. Finally, for at least five years, the average effective systemwide swipe fee for Visa and Mastercard must be at least seven basis points below the current average rate.

Significantly, merchants can assess a surcharge and adjust prices based on the costs associated with accepting different credit cards. A merchant can, if they choose, charge more for a rewards card versus one that doesn’t offer rewards, for example. 

In another important change, merchants will have greater power to negotiate swipe fees with Mastercard and Visa. 

Why wait? Here are 6 Ways to Save on Payment Processing Fees

The settlement will also fund a $15 million merchant education program to help them understand the settlement and implement the changes. 

But there may also be some backlash from consumers if merchants make it harder for them to pay with their preferred cards. PYMNTS Intelligence’s Report, The Credit Economy: The Role of Reward Programs in Consumer Credit Usage, has found that 71% of consumers are very or extremely satisfied with the rewards program offered by their primary credit card. 

Mastercard and Visa do not admit to any wrongdoing. 

“This will produce an incremental benefit to small business owners,” says credit card expert Jason Steele. “But at the same time, it further weakens the case for larger swipe fee reform legislation, such as the so-called Credit Card Competition Act that was defeated last year.” 

What Does the Settlement Mean for Credit Cardholders?

While many small business owners would like to see swipe fees reduced, it’s worth noting that many small business owners also use business credit cards, and this could affect them as cardholders. 

If this settlement is approved, there are possible repercussions for credit card holders:

• Credit card rewards, such as cash back rewards or travel rewards, or other cardholder perks could be scaled back. 
• Cardholders may pay more for using premium credit cards if merchants try to steer them to cheaper options. These cards are popular with small business owners as they often provide perks like travel insurance, car rental insurance, and premium travel rewards. 

It remains to be seen how much these programs will change, but it is likely that there will be some adjustments to credit card rewards and perks. 

Find a great small business reward card now.

How Soon Will Business Owners See a Change in Swipe Fees?

The settlement is subject to final approval by the Eastern District Court of New York. Mastercard’s statement states that changes will not occur until approval of the settlement, most likely in late 2024 or early 2025.

And it’s still possible there will be challenges to the settlement. A previous settlement was reached in 2012 in the 2005 lawsuit, In Re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, but a number of parties did not agree to it. The National Association of Convenience Stores, for example, opted out and urged its members to do so. It has released a statement about this settlement with the headline: “NACS: Swipe Fee Settlement a Bad Deal.” 

The NACS does not believe the settlement goes far enough and notes in its statement that, “the court will have a fairness hearing to consider the settlement and NACS expects large numbers of merchants to oppose any approval of the settlement.” It is encouraging its members to continue to push for proposed legislation, The Credit Card Competition Act. 

Is This The Payment Card Interchange Fee Settlement?

In a previous settlement that arose from the same original lawsuit, businesses and other entities that accepted Visa and/or Mastercard-Branded Cards in the US at any time from January 1, 2004 to January 25, 2019 may be entitled to funds. If you have not received a claim form (mailed in December 2023 and January 2024), you can file a claim here.