Convenience stores and other retailers are urging a U.S. District Court judge to reject another settlement that Visa and Mastercard have proposed in the longstanding lawsuit against them and their banking partners concerning credit card interchange fees.
Visa and Mastercard unveiled their proposed settlement on Monday after a previous settlement proposal was rejected by a judge as not going far enough to protect retailers. The initial lawsuit, which was filed in 2005 by a broad group of retailers and retail associations, alleges that Visa and Mastercard essentially have a monopoly in the credit card transaction-processing market that allows them and their banking partners to charge unnecessarily high fees for every transaction made using their cards.
“No one should be fooled by the credit card industry’s smoke and mirrors,” said National Association of Convenience Stores (NACS) Senior Vice President of Government Relations Lyle Beckwith. “This proposed settlement endorses business as usual, including by letting Visa and Mastercard increase their own fees without any restraints. That could erase the benefits that this settlement pretends to provide. Approving this settlement would contradict the ruling that Judge Brodie made just last year and would declare open season for the credit card companies to hit merchants and their customers with more price increases."
Credit and debit card swipe fees—which have increased 70% since 2020 and reached a record $187.2 billion in 2024—are convenience retailers’ second-highest operating expense after labor, NACS said in a release Monday.
The latest proposal would lower the interchange fees by an average of 0.1 percentage points over a five-year period and would allow retailers to reject certain types of cards that charge higher interchange fees, according to reports. A settlement that was proposed last year would have lowered interchange fees by 0.07%, but it was rejected by U.S. District Judge Margo Brodie after several retail associations said it did not go far enough to prevent the price-fixing of interchange fees.
Before that, a 2016 proposed settlement was overturned by the 2nd U.S. Circuit Court of Appeals after retailers said that proposal also fell short.
“Achieving a settlement that works to reverse current illegal and anticompetitive practices of Visa and Mastercard should be straightforward, but this attempt fails once again and should be rejected,” said Jennifer Hatcher, chief public policy officer at FMI—the Food Industry Association and a member of the executive committee at the Merchant Payments Coalition.
In a statement, Visa said the latest settlement provides relief for merchants.
“After more than 20 years of litigation, Visa and Mastercard have reached a proposed settlement with U.S. merchants of all sizes that would provide meaningful relief, more flexibility and options to control how they accept payments from their customers,” the company said.
A spokesperson for Mastercard could not be reached for comment.
Swipe fees still too high, retailers say
The latest proposal also will not have a meaningful impact on the costs that retailers face, Hatcher said in a statement issued by the Merchants Payments Coalition. She said the total “swipe fee”—the combination of interchange fees and network fees—averaged 2.35% in 2024, and the proposed reduction would simply return the fees to around the same level as 2023, when the total swipe fee averaged 2.36%.
“The miniscule reduction proposed in the settlement on bank fees could still allow Visa and Mastercard to be able to raise their own fees without any limits,” she said. “All of the supposed merchant and consumer savings could easily be canceled by Visa and Mastercard increasing their fees.”
Retailers said the costs are too high for them to absorb and must be passed on to consumers in the form of higher prices. According to the Merchants Payments Coalition, swipe fees for Visa and Mastercard credit cards alone totaled $111.2 billion last year, and total credit and debit card swipe fees hit a record $187.2 billion.
Concern over card segregation proposal
Retailers also remained concerned about the plan to resolve the so-called “honor all cards” rule that the credit card companies have, which requires merchants to accept all types of one brand’s credit cards if they accept any cards at all from that brand. The card companies proposed to segregate their cards into three categories: those that have no rewards, those that have rewards (and have higher interchange fees) and commercial cards, and to allow retailers to accept or reject all cards within a category. Hatcher of FMI, however, said this was an “illusory provision” because 85% of cards offer rewards, and retailers essentially have no choice but to accept them.
“Banks would likely also have the power to move cards into different categories, effectively forcing merchants to continue to take all cards and pay their high prices,” she said.
Hatcher also called on Congress to pass the Credit Card Competition Act, which was introduced into both the U.S. House and Senate in 2023 but has stalled. That legislation would enable credit card transactions to be processed over networks that are not affiliated with Visa or Mastercard, which retailers said would introduce competition and result in lower prices.
Beckwith of NACS, Alexandria, Virginia, agreed.
“The imaginary relief that this proposed settlement claims to offer is insulting to every one of us who ultimately foot the bill for higher credit card fees in the form of higher prices for gas, food and other essentials. The courts have emphatically rejected the two previous settlement offers, and this one should be rejected as well,” Beckwith said. “It is very clear that Visa and Mastercard have no interest in fixing the broken system—and will do everything they can to make it worse. We need Congress to pass the Credit Card Competition Act to provide relief to Main Street businesses and their customers.”
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