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Visa, Mastercard Settle on 19-Year Interchange Fee Battle — Here’s What It Means

Brett Holzhauer's image
Brett Holzhauer
Brett Holzhauer's image

Brett Holzhauer

Content Contributor

51 Published Articles

Countries Visited: 22U.S. States Visited: 29

Brett is a personal finance and travel junkie. Based out of Fort Lauderdale, he's had over 100 credit cards and earned millions of credit card rewards.
Edited by: Stella Shon
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Stella Shon

News Managing Editor

106 Published Articles 738 Edited Articles

Countries Visited: 25U.S. States Visited: 22

With a degree in media and journalism, Stella has been in the points and miles game for more than 6 years. She most recently worked as a Corporate Communications Analyst for JetBlue. Find her work in ...

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After 19 years of court battles, Visa and Mastercard have agreed to settle a class action lawsuit, in which they agreed to reduce swipe fee rates for merchants.

In addition, the 2 credit card network giants will reduce and cap the interchange fees they charge for the next 5 years, giving businesses the ability to point consumers towards more preferable payment options at checkout.

The settlement hasn’t been approved just yet, but it’s very likely things are going to take a significant turn for credit card users in the coming years. Here’s what you need to know.

A Long Fight With Unknown Results

Every time you swipe your credit card, the network that processes that payment charges the merchant a fee. That fee is typically between 1 to 3% of the sale but can be as high as 4% for premium credit cards.

However, when you process billions of transactions, this creates a significant revenue stream for the Visa and Mastercards of the world. In 2023, banks brought in over $100 billion per year in credit card swipe fees, according to the Merchants Payments Coalition. That number soars to $172 billion if debit cards are included.

Contactless payments Square tablet
Image Credit: Christiann Koepke via Unsplash

Now that retailers and merchants have more control over how consumers pay, they can clearly drive you to pay with lower-fee methods such as debit cards or cash. This isn’t a new play for merchants, though.

Roughly a fourth of small businesses have been charging fees for using a credit card for payment, according to payment processor and consultancy TSG. If the merchants are being tacked with significantly fewer fees, some have said it could lower costs for the end consumer. However, that’s yet to be seen.

Hot Tip:

These payment fees help pay for the expense of credit card features and benefits like airport lounge access, cell phone insurance, and travel insurance, among others. 

What the Future Holds for Debit and Credit Cards

Points and miles enthusiasts shouldn’t worry just yet, as this marathon of legal back-and-forth isn’t officially over. The U.S. District Court for the Eastern District of New York still needs to accept the settlement, and it could potentially be appealed.

But if merchants have their way and can begin segmenting different networks and charging consumers differently, the future could theoretically look like this:

If you go to your local coffee shop for a coffee (let’s say $5 out the door), your payment options could change the price you pay significantly.

  • If you’re paying cash, it’s $5. 
  • Debit card, $5 + fee. 
  • Cash-back card on the Visa Signature network, $5 + higher fee.
  • Premium rewards card, $5 + even higher fee.

Final Thoughts

For now, your credit card swiping or tapping experience won’t look any different. And since the vast majority of consumers prefer using debit and credit cards, there won’t be a “kill-off” of sorts.

But in the coming years, your purchasing process and choices could look different as merchants reconsider the cost of fees to their bottom lines.

Brett Holzhauer's image

About Brett Holzhauer

Brett is a personal finance and travel junkie. Based out of Fort Lauderdale, he’s had over 100 credit cards and earned millions of credit card rewards. He learned the tricks of the trade from his mom, and has taken many steps forward. He wasn’t exposed to much travel as a kid, but now has a goal of reaching 100 countries in his life. In 2019, he sold all of his possessions to become a digital nomad, and he says it was one of the best decisions he ever made. He plans to do it again at some point in his life.

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