Visa and Mastercard strike deal to lower merchant fees

Overview of the Proposed Settlement

Visa and Mastercard have announced a proposed settlement aimed at reducing the fees that merchants pay when customers use their credit cards. This deal could potentially end a 20-year legal battle over interchange fees, which are often passed on to consumers through higher prices.

Key Details of the Settlement

Fee Reductions

• Interchange Fee Decrease: The settlement proposes to lower interchange fees by 0.1% over the next five years.
• Standard Consumer Card Cap: Rates for standard consumer cards will be capped at 1.25% for eight years, representing a significant reduction.

Merchant Flexibility

• Surcharge Options: Merchants will have the option to impose surcharges on credit card transactions.
• Card Acceptance Choices: Merchants can choose whether to accept certain higher-cost cards, which often come with premium rewards.

Implications for Merchants and Consumers

• Cost Savings: The settlement could save merchants and consumers money, as lower fees may lead to reduced prices for goods and services.
• Consumer Rewards Impact: There are concerns that lowering fees might affect the rewards programs associated with premium credit cards.

Next Steps

The proposed settlement is subject to approval by a federal judge. If approved, it could save merchants over $200 billion during the settlement period, making it one of the largest class-action settlements in U.S. antitrust history.