Visa and Mastercard Swipe-Fee Deal Could Reshape Credit Card Rewards and UK Spending

Visa and Mastercard are preparing to overhaul how credit card transactions are priced after reaching a proposed settlement that could end two decades of legal battles with retailers. The move could bring small savings for merchants while also disrupting how consumers earn rewards on their cards.

As reported by Fox Business, the credit card giants agreed to lower the interchange fees that retailers pay every time a customer makes a purchase. These charges, also known as swipe fees, typically range between 2 per cent and 2.5 per cent per transaction. Under the settlement, that figure would drop by around one-tenth of a percentage point for most US credit card transactions over the next five years.

Although the reduction seems minor, it would apply across millions of purchases, offering potential savings to retailers that could trickle down to consumers. However, many industry groups say the changes do not go far enough.

Retailers Say Cut Is Too Small

The National Retail Federation (NRF) argued that swipe fees remain one of the highest operating costs for stores and contribute to price inflation for households. The organisation estimated that these fees add over £950 in annual costs to the average family's spending.

Stephanie Martz, the NRF's chief administrative officer, said the reduction is 'a small fraction' of what retailers have been demanding. She argued that the proposed deal would only roll back rates by about a year's worth of increases, calling for deeper cuts.

The National Association of Convenience Stores also criticised the agreement, warning that it could grant Visa and Mastercard greater legal protection while allowing them to maintain high fees and restrictive rules.

What the Deal Could Change

Under the proposed settlement, merchants would gain more flexibility in deciding which types of credit cards they accept. Currently, shops that take one Visa or Mastercard product must accept them all. As reported by the Wall Street Journal, this rule would be loosened, allowing businesses to refuse premium or high-reward cards that charge steeper processing fees.

This change could have a direct impact on consumers. Retailers may begin turning away certain cards, especially those with lucrative rewards programmes that cost them more to process. As a result, shoppers could see fewer points or cashback offers available over time, particularly on premium cards.

The proposed settlement also includes measures to give smaller retailers more power to negotiate payment terms and increase transparency about costs. Visa said the deal would bring 'meaningful relief, more flexibility and options' to merchants, while Mastercard called it the 'best resolution for all parties'.

A 20-Year Legal Battle Nears Its End

The dispute between credit card networks and merchants dates back to 2005, when retailers accused Visa, Mastercard and major banks of using anti-competitive practices to fix interchange fees. The proposed deal, which still requires approval from a US federal judge, could finally bring to a close one of the longest-running legal battles in the financial industry.

Both companies have denied wrongdoing throughout the proceedings but said the agreement would allow them to 'focus on delivering better value and protection for consumers'.

What It Means for Shoppers

If the settlement is approved, cardholders could face a mixed outcome. Lower merchant costs might ease inflationary pressures slightly, but reduced card acceptance and leaner rewards schemes could limit benefits for frequent users.

Analysts suggest the deal marks the start of a broader rethink of how credit card ecosystems function, balancing affordability for businesses with incentives for consumers. For now, shoppers may want to keep an eye on their card policies, as the perks that make spending feel rewarding could soon look very different.