Visa, Mastercard and its card-issuing banks agreed to a giant antitrust settlement to cap processing credit card fees among U.S. merchants, potentially ending close to two decades of litigation.

The settlement, which began as a 2005 lawsuit, is set to lower and save U.S. merchants nearly $30 billion over a five-year deal, allowing merchants, especially small businesses, to flexibly adjust how much consumers can be charged for goods paid for by credit cards, per Axios.

Although the decision has yet to receive court approval, according to Business Insider, it will make transactions through Visa and Mastercard cheaper for some retailers and consumers. However, it reportedly may force some shoppers who use premium cards with higher interchange charges to pay higher prices.

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What have the rates been previously?

According to Bankrate, merchants were charged credit card processing fees — a fee that businesses are charged for accepting payment from a credit card — between 1.5% to 3.5%.

Additionally, according to Reuters, “Merchants have long accused Visa and Mastercard of charging inflated swipe fees, or interchange fees, when shoppers used credit or debit cards, and barring them through ‘anti-steering’ rules from directing customers toward cheaper means of payment.”

According to a press release from the Merchant Payments Coalition, U.S. merchants were charged a total of $100.77 billion in swipe fees in 2023. This is $7.5 billion more than in 2022, making 2023 “the first time in history that Visa and Mastercard credit card swipe fees surpassed the $100 billion mark.”

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The settlement, if approved, would lower these rates by at least 0.04% for a minimum of three years and ensure an average rate that is 0.07 of a percentage point lower than the current average for five years, per Reuters.

What this means for merchants and consumers

According to CNN, Visa and Mastercard’s settlement — one of the largest in U.S. antitrust history — will charge merchants lower fees, but it doesn’t necessarily equate to some consumers saving money.

It now gives merchants the opportunity to impose surcharges on Visa and Mastercard cardholders, which will, per CNN, “likely hit cardholders who get rewards such as cash back and airline miles, since those can carry higher swipe fees.”

Some premium cards like the Chase Sapphire Reserve card currently hold higher interchange rates that may affect consumer purchases, according to Business Insider.

“While this settlement is a step in the right direction and will provide a limited amount of short-term relief to small businesses, it does not solve the long-term anti-competitive rate-setting practices that are the root of this problem,” Jeff Brabant, vice president of federal government relations at the National Federation of Independent Business, told The Associated Press.

Despite this, it’s a step in the right direction “by delivering substantial certainty and value to business owners, including flexibility in how they manage acceptance of card programs,” Mastercard’s chief legal officer Rob Beard said in a statement provided to Axios.

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