Visa and Mastercard have been ordered to pay $38 billion to settle a landmark class action lawsuit accusing the payment networks of charging merchants excessive swipe fees—the interchange fees that retailers pay every time a customer uses a credit card. In June 2026, U.S. District Judge Brian Cogan in the Eastern District of New York granted preliminary approval to the settlement, calling it “fair, reasonable, and adequate” after two decades of litigation that began in 2005.
The settlement will affect more than 12 million merchants and represents one of the largest settlements in payment processing history. This settlement comes after years of legal struggle, including a previous attempt in 2024 when a judge rejected a $30 billion settlement proposal, citing concerns about its adequacy. The new agreement includes not only the direct $38 billion payment but also extensive concessions that are valued at more than $200 billion over eight years in the form of lower processing rates and other benefits to merchants.
Table of Contents
- What Are Swipe Fees and Why Have Merchants Been Fighting Them?
- The Twenty-Year Legal Battle Leading to the Settlement
- What Fee Reductions Will Merchants Actually Receive?
- Who Qualifies as a Merchant in This Settlement?
- Why Was the Previous $30 Billion Settlement Rejected?
- How Long Will the Settlement Benefits Last?
- What Impact Will This Settlement Have on Consumers?
What Are Swipe Fees and Why Have Merchants Been Fighting Them?
Swipe fees are the charges that payment processors levy on merchants each time a customer pays with a credit card. These fees, also known as interchange fees, typically range from 1 to 3 percent of the transaction value and are set by Visa and Mastercard. For decades, merchants have argued that these rates are excessive and that the payment networks abuse their market dominance by setting fees that have no reasonable relationship to the actual costs of processing transactions.
A small grocery store processing $50,000 in credit card transactions daily, for example, might pay $500 to $1,500 in swipe fees each day—costs that are ultimately passed along to consumers through higher prices on goods. Over a year, a mid-sized retailer could pay hundreds of thousands of dollars in these fees. Large retailers and small businesses alike have claimed that Visa and Mastercard, which together control approximately 80 percent of the card payment market in the United States, set these rates without meaningful competition, making it impossible for merchants to negotiate better terms.
The Twenty-Year Legal Battle Leading to the Settlement
The class action lawsuit began in 2005 when merchants started collectively challenging the legality of Visa and Mastercard’s swipe fee practices. The litigation has been lengthy and complex, involving arguments about antitrust law, market power, and whether the payment networks’ fee-setting practices violated federal competition laws. For years, both payment networks contested the charges, claiming their fees reflected legitimate costs and that merchants had choices in how they accepted payments.
In 2024, approximately two years before the June 2026 approval, a judge rejected an earlier settlement proposal worth $30 billion, determining that it did not adequately compensate merchants for the harm caused by the alleged fee-setting scheme. This rejection required both sides to continue negotiating and ultimately resulted in a larger settlement with additional merchant benefits. The journey from the initial lawsuit filing through multiple settlement attempts demonstrates how difficult it can be for merchants to challenge the market power of dominant payment networks through litigation.
What Fee Reductions Will Merchants Actually Receive?
The settlement includes two specific fee reduction mechanisms. First, Visa and Mastercard have agreed to reduce their interchange fees by 0.1 percentage points for five years. While this might sound small, for a merchant processing $10 million in annual transactions, a 0.1 percentage point reduction could save approximately $10,000 per year.
Second, the payment networks have agreed to cap standard consumer credit card fees at 1.25 percent for eight years, meaning merchants will know their maximum costs for a longer period and can plan their pricing strategies accordingly. Beyond these direct fee reductions, the settlement includes broader concessions valued at more than $200 billion over eight years. These concessions encompass various benefits to merchants, including pricing relief, changes to how fees are calculated, and potential technical or operational improvements. However, it’s important to note that while these concessions are valued at over $200 billion in aggregate, they represent commitments over an eight-year period and will be distributed across millions of merchants, meaning individual businesses should not expect windfalls but rather modest, gradual relief from transaction costs.
Who Qualifies as a Merchant in This Settlement?
The settlement covers more than 12 million merchants who accepted Visa or Mastercard payments during the class period. This includes large retailers, small businesses, restaurants, grocery stores, gas stations, online merchants, and essentially any business that has accepted these major credit cards. Merchants do not need to opt in to participate; they are automatically included in the class unless they take steps to exclude themselves.
A small business owner who accepted Visa and Mastercard payments over the past two decades would qualify for settlement benefits without having to file a claim or submit paperwork. Even merchants who are no longer in business during the settlement distribution period may be eligible if they accepted the cards during the relevant time period. The automatic inclusion approach differs from some consumer class actions, where individuals typically must submit a claim to receive compensation, making this settlement potentially more accessible to a broad range of affected businesses.
Why Was the Previous $30 Billion Settlement Rejected?
When a judge rejected the prior $30 billion settlement proposal in 2024, the court found that the amount and terms were insufficient to fairly compensate merchants for the harm caused by allegedly excessive swipe fees. The judge raised questions about whether $30 billion, spread across millions of merchants over the settlement period, actually represented meaningful relief given the enormous cumulative fees merchants had paid over decades. This rejection underscored a critical challenge in settlement negotiations: determining what amount is truly “fair” when quantifying harm across an entire industry.
The rejection also highlighted the legal complexity of antitrust cases involving payment networks. Determining exactly how much merchants overpaid due to anticompetitive practices requires economic modeling, expert testimony, and analysis of what fees would have been in a competitive market. The additional $8 billion difference between the rejected and approved settlements, combined with the expanded merchant protections and fee caps, suggests the judge found these elements addressed previous concerns about adequacy.
How Long Will the Settlement Benefits Last?
The fee reduction components of the settlement have different timelines. The 0.1 percentage point fee reduction is scheduled to last for five years, while the 1.25 percent cap on standard consumer credit card fees extends for eight years. The broader concessions and benefits included in the $200 billion valuation also span the eight-year period.
After these timeframes expire, merchants will no longer be bound by these specific fee limitations, and rates could potentially increase, though market conditions and any regulatory changes might affect future fee levels. For merchants managing their business finances, these timelines matter significantly. A business can plan operational strategies knowing that certain fee caps apply for the next eight years, but they should avoid assuming these favorable conditions will continue indefinitely. Merchants may want to use this period of predictable, lower fees to invest in their operations or build reserves against the possibility of higher fees after the settlement period ends.
What Impact Will This Settlement Have on Consumers?
While the settlement directly compensates merchants, consumers may see indirect benefits through potentially lower prices if retailers pass along some of their savings from reduced swipe fees. However, there is no guarantee that merchants will lower prices—they may instead use savings to increase profit margins or offset other costs. Consumer credit card users will not receive direct payments from the settlement, as it is focused on merchant compensation for business losses, not consumer compensation.
The settlement may also influence how credit card companies price their services going forward. With caps on certain fees and requirements to reduce others, Visa and Mastercard may adjust other aspects of their pricing models, potentially affecting credit card rewards programs, annual fees, or other cardholder benefits. For consumers, the settlement represents a long-term structural change in how payment processing works, but the direct consumer impact will depend on how merchants choose to use their savings and how payment networks adapt their business models over the coming years.
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Sources
- Visa, Mastercard Swipe-Fee Settlement: No Cash Claims on OpenClassActions.com — continuing news coverage of this case.