You probably don’t think about the plumbing of the global economy when you’re buying a $5 latte. You tap your card, the machine beeps, and you walk away. But behind that beep is a massive, decades-long legal war. The Visa and Mastercard lawsuit is basically the "Final Boss" of corporate litigation. It’s a mess of antitrust claims, multi-billion dollar settlements, and a legal back-and-forth that has outlasted many of the lawyers who started it.
The core of the issue is simple: swipe fees. Or, if you want to sound fancy, "interchange fees." Every time you use a credit card, the merchant (the store) has to pay a percentage of that sale to the banks and the card networks. Usually, it’s around 1% to 3%. That sounds tiny. It isn't. When you add up every transaction in the United States, we’re talking about $100 billion a year. Merchants hate this. They’ve been fighting Visa and Mastercard in court since 2005, claiming these fees are fixed and unfair.
The $30 Billion Settlement That Almost Happened
In early 2024, it looked like we finally had a resolution. A massive settlement was proposed that would have seen Visa and Mastercard lower their swipe fees by at least four basis points for three years. It was valued at roughly $30 billion in savings for U.S. merchants.
Then, a judge stepped in.
U.S. District Judge Margo Brodie in Brooklyn basically said, "No thanks." In June 2024, she rejected the settlement. Why? Because many of the biggest retailers—we're talking Walmart, Target, and the National Retail Federation—argued the deal didn’t go nearly far enough. They felt it was a "band-aid on a bullet wound." The settlement would have temporarily lowered fees but wouldn't have actually changed the underlying structure that allows Visa and Mastercard to dominate the market.
Honestly, the rejection was a shock to some, but a relief to others. If the settlement had passed, merchants would have been barred from suing over these specific issues again for a long time. They decided they’d rather keep fighting in court than accept a deal they viewed as "paltry."
Why the Visa and Mastercard Lawsuit Matters to Your Wallet
You might think this is just a bunch of billionaires fighting other billionaires. It’s not.
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When a small coffee shop pays 3% on every transaction, they don't just eat that cost. They raise the price of the coffee. Everyone pays that "credit card tax," even the person paying with cash. It’s a weird, invisible inflation that has been baked into the American economy for decades.
The "Anti-Steering" Rules
One of the biggest gripes in the Visa and Mastercard lawsuit involves what are called anti-steering rules. For years, Visa and Mastercard told merchants they couldn't offer discounts to customers for using a cheaper card or paying cash. They also couldn't tell you, "Hey, please use this Discover card instead because it costs me less."
The legal pressure has forced some of these rules to relax, but the "honor all cards" rule still stands. If a store accepts Visa, they have to accept all Visas—even the ultra-premium ones that charge the merchant much higher fees to fund those fancy travel rewards you love.
The Monopoly Argument
The Department of Justice (DOJ) has also jumped into the fray, recently filing its own separate suit against Visa. This is different from the merchant class-action suit, but it’s all connected. The DOJ claims Visa uses its size to box out any potential competitors.
Think about it. If a tech startup wants to create a better, cheaper way to pay, they usually have to go through Visa’s rails anyway. Visa often signs "routing" agreements with these companies. The DOJ basically says Visa tells these smaller firms, "We’ll give you a deal if you don't compete with us, but we'll crush you if you do."
It’s a classic antitrust play.
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What Visa and Mastercard Say
To be fair, the card networks aren't just twirling their mustaches. They argue that they provide a service that is incredibly secure, global, and instant. They’ve spent billions on fraud prevention and technology. They believe the fees are a fair price for the massive volume of business they bring to merchants. Without Visa and Mastercard, how would a small shop in Ohio safely accept a payment from a tourist from France?
It's a fair point, but the courts are increasingly skeptical that this justifies the lack of price competition.
The Future of Credit Card Rewards
Here is the part where you might get nervous. If the Visa and Mastercard lawsuit eventually results in much lower interchange fees, the money for your "free" flights and 2% cashback might dry up.
Banks use the interchange fees they get from merchants to fund those rewards programs. If the fee drops from 2.5% to 1%, the bank isn't going to just give you that 1.5% out of the goodness of their heart. They’ll likely cut the rewards. This has already happened in the European Union, where interchange fees are capped by law at 0.2% for debit and 0.3% for credit. You’ll notice that European credit cards have almost zero rewards compared to the "Chase Sapphire" or "American Express Gold" culture in the U.S.
It's a trade-off. Lower prices at the grocery store, but you pay for your own flight to Florida.
What Happens Next?
Since Judge Brodie rejected the settlement, we are headed back toward a potential trial or a much more aggressive negotiation. The merchants are emboldened. They know the current regulatory climate is leaning toward "Big Tech" and "Big Finance" skepticism.
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We are also seeing legislative pressure. The Credit Card Competition Act (CCCA) is a bill floating around Congress that would require big banks to offer at least two different networks for routing transactions—and one of them cannot be Visa or Mastercard. It’s basically a forced injection of competition.
Actionable Steps for Business Owners and Consumers
If you’re watching this play out, you don't have to just sit on the sidelines.
For Small Business Owners:
- Audit your statements. Most merchants don't actually know what they’re paying because processors hide fees in "tiered pricing." Switch to "interchange-plus" pricing so you can see exactly what is going to the networks versus your processor.
- Explore Surcharging or Discounting. In many states, it’s now perfectly legal to offer a "cash discount." Just make sure your signage is clear to avoid a headache with local laws.
- Look at Pay-by-Bank. New "Open Banking" tech allows customers to pay directly from their bank account, bypassing the card networks entirely. The fees are often pennies rather than percentages.
For Consumers:
- Diversify your rewards. Don't hoard millions of points in one system. If a legal ruling or new law hits the banks' margins, they can (and will) devalue your points overnight.
- Watch the "Hidden Tax." Be aware that when you see a "3% convenience fee" at a local restaurant, you’re seeing the Visa and Mastercard lawsuit play out in real-time.
- Support Competition. Using tools like FedNow or RTP (Real-Time Payments) when they become available helps break the duopoly.
The reality is that the U.S. payment system is the most expensive in the developed world. Whether through this specific lawsuit, the DOJ’s intervention, or new laws in Washington, the era of unchecked swipe fees is likely coming to an end. It’s going to be a bumpy ride for the banking industry, and it might mean the end of the "golden age" of credit card churning, but for the average merchant, it’s a fight for survival that has been twenty years in the making.
Stay tuned to the court dockets in the Eastern District of New York. That’s where the future of your wallet is being decided.