What transpired inside a federal courthouse in Brooklyn earlier this month has a subtly historic quality. A case that started in 2005, when most Americans were still using magnetic stripe cards at grocery store checkout lines and smartphones were nonexistent, was slowly coming to an end. A revised $38 billion settlement between Visa, Mastercard, and over 12 million merchants who had accused the card networks of charging exorbitant fees to process credit card payments was given preliminary approval by U.S. District Judge Brian Cogan.
Twenty-one years is a long time to wait for a decision on anything. The initial complaint claimed that Visa and Mastercard had colluded with large banks to inflate what the industry refers to as “swipe fees” or interchange fees, which are the tiny percentages that retailers must pay each time a customer taps or slides a card at the register. Once a relatively small line item, those fees have increased significantly. The Merchants Payments Coalition reports that swipe fees collected by Visa and Mastercard in the US increased from $25.6 billion in 2009 to $118.8 billion in 2025 alone. The average rate is approximately 2.36%. That figure is not at all abstract to small business owners operating on narrow profit margins.
The settlement was characterized by Judge Cogan as “fair, reasonable, and adequate,” which carries particular legal weight but also indicates where this is probably going. He pointed out that compared to a previous $30 billion deal that a different judge rejected in June 2024 for being too modest, the agreement offers more extensive relief. More significant concessions were included in this updated version: Visa and Mastercard agreed to cap standard consumer card rates at 1.25% for eight years and reduce swipe fees by 0.1 percentage points for five years. Even though some in the retail sector would contend that’s not nearly enough, that is a significant reduction.
The deal’s impact on the long-standing “Honor All Cards” rule is arguably the most structurally significant aspect. For many years, businesses that took Visa or Mastercard were essentially obliged to take all of the cards issued by those networks, including the pricey rewards cards that have higher processing costs. In accordance with the new terms, merchants could decide whether to accept commercial cards, premium rewards cards, and standard consumer cards separately. Although it’s unclear how many retailers will actually use that flexibility in practice, that is a significant change in leverage.
Not everyone is prepared to declare victory. One of the biggest trade associations in the world, the National Retail Federation, criticized the settlement, claiming that the credit card industry was essentially flawed. That criticism was echoed by the National Association of Convenience Stores, whose general counsel anticipated numerous formal objections in the future. Walmart, a major player in discussions about retail policy, was also against the agreement. These groups feel that the settlement documents address a systemic issue without truly resolving it; they believe that retailers will continue to face pressure and that consumers who do not use rewards cards may eventually have to pay for those who do.
The precise amount of this that reaches consumers is still unknown. Lower prices on store shelves do not always follow from the promise of reduced fees. The relationship between processing costs and final prices is complex, and retailers determine their own margins. What is evident is that Mastercard’s stock increased 2% on Tuesday while Visa’s increased 1.7%, which is a fairly telling indication of how Wall Street is interpreting the results. According to the markets, neither company gave away too much.
As this develops, it’s difficult to ignore how much—and how little—the payments landscape has changed since 2005. The underlying conflict between networks trying to extract value from every transaction and retailers attempting to keep costs low is still present today just as it was when the lawsuit was initially filed. The objections are not going away quietly, and a preliminary approval is not a final one. What Brooklyn has produced is a noteworthy accomplishment. It’s a different matter entirely whether it’s justice or simply a compromise that everyone can accept.
