In a significant move, Visa and Mastercard revealed on Monday their plans for a proposed settlement that aims to reduce the fees merchants are charged for using their credit card networks.

These charges, which retailers incur every time a customer swipes a card, are frequently transferred to consumers in the form of increased prices for products and services.

Known as swipe fees or interchange fees, these costs have been criticized by the National Retail Federation (NRF) for contributing to inflation, thereby escalating prices for households across the United States.

Typically ranging from 2% to 2.5%, these fees are set to be reduced under the new agreement. The settlement, a resolution to two decades of legal disputes, stipulates that Mastercard and Visa will lower these fees by approximately 0.1% on most credit card transactions in the U.S. over the next five years, as indicated in regulatory filings.

This reduction means merchants will pay slightly less on each transaction. When applied to millions of purchases, this could translate into considerable savings for both retailers and consumers.

The NRF has long argued that swipe fees are one of the highest operating expenses for retailers, which it said drives up consumer prices by over $1,200 a year for the average family. 

Stephanie Martz, NRF chief administrative officer and general counsel, said the planned reduction announced in Monday’s settlement doesn’t go far enough and that “it is a small fraction of the 2.35% average swipe fee charged to merchants in 2024 and equivalent to rolling back fees by only about one year.” Martz said swipe fees have grown by three times as much since 2010 and averaged 2.26% in 2023. She believes the new proposed settlement should be rejected.

The National Association of Convenience Stores (NACS) echoed this sentiment, saying that the settlement should be rejected because “it will not benefit merchants and consumers and would provide the credit card giants legal immunity to increase fees and anti-competitive practices.”

Mastercard told FOX Business that it believes the deal is the “best resolution for all parties, delivering the clarity, flexibility and consumer protections that were sought in this effort.” 

With the deal, Mastercard said smaller merchants will gain more acceptance choices, reduced costs and simplified rules.

“Even more, it allows us to focus our energies on continuing to give consumers, small businesses and larger merchants what they expect from Mastercard – a better payments experience, strong value and peace of mind,” the company said.

Visa said the proposed settlement with US merchants of all sizes “would provide meaningful relief, more flexibility and options to control how they accept payments from their customers.” 

The terms of the deal would also give merchants more power by loosening the requirements that state that if they accept one of the network’s cards, they would be required to accept all of them. For example, stores could choose whether to take consumer cards, business cards, or both.

Within consumer cards, they could decide whether to accept standard cards, premium rewards cards, or both. But merchants can’t pick and choose between banks, which means they can’t accept a Chase Visa but reject a Citi Visa if both are the same card type.

The deal still needs to be approved by a federal judge in the Eastern District of New York before it becomes final. The settlement would resolve ongoing US merchant litigation against Mastercard and Visa that is related to interchange fees and merchant rules.

Both companies were sued by merchants over how they set and enforce credit-card swipe fees and rules that limit how merchants can steer customers toward cheaper payment methods. Those cases have been ongoing since 2005. The companies have not admitted any wrongdoing.

The changes to its fee system and card-acceptance rules aren’t expected to take effect until the court approves the settlement, which is expected sometime in late 2026 or early 2027.