Lower Merchant Fees on the Way? Your Credit Card Rewards Might Pay the Price

Visa and Mastercard’s proposed $38 billion settlement with U.S. merchants could reshape how Americans pay, and how much they earn back when they do. The agreement aims to end a decades-long swipe-fee settlement battle over interchange, or “swipe,” fees, the small but powerful charges merchants pay each time a customer uses a credit card. If approved, it would slightly lower those fees and give businesses more flexibility to pass costs to consumers or reject high-fee premium cards.

Some see it as overdue relief for retailers burdened by card processing costs. While others argue that the change is primarily cosmetic, offering only marginal savings while preserving the networks’ control over the payment system. For consumers, the real impact may come elsewhere: in the gradual erosion of the rich rewards programs, points, miles, and cash-back offers that have long been funded by those same fees.

Key Takeaways

• Visa and Mastercard have offered to lower merchant interchange fees by 0.1% over five years, aiming to settle a decades-long lawsuit over alleged price-fixing practices.
• With lower interchange fees, credit card rewards programs may shrink, as these perks are primarily funded by the fees merchants pay to card networks.
• The proposal would allow retailers to add surcharges for credit card payments or decline premium cards that carry higher fees, giving businesses more control over payment costs.
• Retail groups argue the reduction is too small to make a real difference, calling the proposal inadequate and urging courts or, potentially, Congress to impose more substantial reforms.

The $38 Billion Swipe-Fee Settlement Deal That Could Reshape Credit Card Rewards

Visa and Mastercard’s latest truce with U.S. merchants is being sold as a win for Main Street. The fine print suggests something more complicated: a slow, subtle squeeze on the rich credit card rewards that American consumers have come to treat as a birthright.

The card networks and a group of major banks have agreed to a revised settlement valued at roughly $38 billion to resolve a long-running antitrust battle over “swipe fees,” the charges merchants pay each time a customer uses a credit card. The deal, announced November 10, 2025, would trim some of those fees, cap others, and expand merchants’ ability to steer customers toward cheaper payment options and to add surcharges on card transactions. It is designed to replace an earlier, smaller settlement that a federal judge rejected as inadequate. It still requires court approval, and several merchant groups are already lining up against it.

At the heart of the dispute is interchange, the small percentage fee embedded in every card payment that has quietly become a major profit engine for banks and a major cost line for retailers. In the United States, those fees typically run around 2% to 2.5% on credit card transactions, higher than in most developed markets. For years, merchants have argued that Visa and Mastercard, working with large card-issuing banks, used their market power to keep those fees elevated, forcing businesses to subsidize the lucrative travel points, cash-back offers, and premium perks that cardholders enjoy.

The latest agreement nudges that system rather than upending it. Under its terms, average credit card interchange rates would fall modestly for several years, with a slight reduction — about one-tenth of a percentage point — locked in for five years. Fees on basic consumer credit cards would be capped at 1.25% for eight years. Merchants would gain more flexibility to choose which card categories they accept, softening long-standing rules that effectively compelled them to honor all cards bearing a network’s logo if they accepted any at all. They would also gain clearer rights to impose surcharges on credit transactions, within defined limits and subject to state law and disclosure requirements.

Neither Visa nor Mastercard admits wrongdoing under the deal. Both portray the settlement as a way to bring a decades-long legal saga to a close while preserving the essential structure of the U.S. payments system. Their argument is straightforward: a secure and convenient card network costs money to run, including interchange, fraud protection, credit risk, and customer rewards; any calibrated relief to merchants should not threaten those benefits.

Merchant advocates are unconvinced. For them, the headline numbers mask a familiar pattern: modest, temporary concessions that leave the fundamental economics largely intact.

The core of their criticism is that the fee relief is small relative to the total volume of card transactions. A reduction of 0.1 percentage point on a fee of more than 2% matters in aggregate dollar terms, but many individual businesses will experience it as little more than a rounding adjustment in their cost structure. The most significant caps and constraints also expire after several years, raising concerns that fees could drift higher once the settlement period ends.

There is also skepticism about how much practical freedom merchants will have to steer customers. While the agreement envisions the ability to differentiate among card types, such as standard consumer cards versus high-fee premium rewards products, merchants know the reality at the checkout. Telling a customer that their preferred travel card is not welcome or will cost extra is risky for anyone worried about losing a sale or damaging goodwill. For smaller businesses, already wrestling with tight margins and stiff competition, the theoretical right to refuse expensive cards may be difficult to exercise.

What makes this settlement different from previous skirmishes is not the size of the fee cut but what it signals. It represents a formal acknowledgment, in a high-profile legal resolution, that the model that funds U.S. credit card rewards is under scrutiny. For nearly two decades, the engine has been simple: merchants pay relatively high swipe fees; those proceeds help support generous points, miles, and cash-back; card issuers compete to outbid each other on rewards; and consumers gravitate toward the flashiest offers, often unaware that the cost is baked into retail prices.

If that revenue engine is nudged even slightly, someone has to absorb the strain. In theory, the options are straightforward: card networks and issuing banks could accept lower margins; merchants could keep the savings; or rewards programs could quietly become less generous over time. In practice, the outcome is likely to be a blend, with the cost most visible at the edges of consumer benefits.

The U.S. has seen this pattern play out abroad. When regulators in Europe and Australia imposed tougher caps on interchange, the richest reward programs were scaled back, annual fees adjusted, and “free” perks became less plentiful. In the United States, post-crisis limits on debit card interchange coincided with the decline of many debit rewards programs. The current settlement is milder and market-driven rather than regulatory, but it points in the same general direction: pressure on the subsidy that makes 2%, 3%, 5x, and 10x rewards sustainable at scale.

Rather than an abrupt collapse of points and miles, industry analysts expect an incremental reshaping that is easy to miss in the headlines but noticeable over time. Issuers facing slightly thinner economics on each swipe may respond by trimming earn rates on new products, tightening caps on bonus categories, making redemption options less generous, or shifting more value behind annual-fee paywalls. Large sign-up bonuses, which have been an expensive marketing weapon in the battle for affluent customers, could become less extravagant. Perks such as lounge access, statement credits, and elite status tie-ins may be narrowed or more heavily restricted.

At the same time, the settlement’s provisions on surcharging and card acceptance could alter the checkout experience. More merchants, especially in sectors with slim margins, may experiment with explicit “credit card fees” or cash discounts, making the cost of card acceptance more visible to consumers. Some may highlight preferred payment methods, cheaper debit networks, bank transfers, or lower-fee card types, as they look to reclaim a slice of economics long ceded to the card industry. While large chains are likely to move cautiously to avoid customer backlash, they also have the leverage and data to test new structures at scale quietly.

For cardholders, the prospect of paying more out of pocket at the register while earning slightly less in rewards is the uncomfortable flip side of what is being framed as a merchant victory. The settlement does not require merchants to pass any savings through to consumers via lower prices, and many are likely to view the relief as long-awaited compensation for years of elevated costs. In fiercely competitive categories, some of that benefit may filter into pricing or investment, but isolating its effect will be challenging.

Whether the deal ultimately takes effect in its current form is far from assured. It must clear judicial review from the same federal judge who previously threw out a smaller settlement for not going far enough. Early statements from merchant coalitions suggest they will argue that the revised package still falls short of addressing the dominant networks’ underlying market power. Parallel political efforts, including proposals to require more competition in routing credit transactions over different networks, remain in play and could impose more profound structural changes than any negotiated settlement.

What the agreement does, however, is move the debate into a new phase. The question is no longer whether swipe fees are legally and economically contested; they clearly are, but who will bear the cost of any adjustment? Networks and banks will fight to preserve profitability. Merchants will push for further concessions and more routing choices. In the middle sit consumers, who have grown used to being rewarded for every tap and swipe and may only gradually discover that those benefits are neither free nor guaranteed.

For now, the golden age of U.S. credit card rewards is not over. Issuers still rely on them to attract and retain customers; airlines and hotels still depend heavily on selling miles and points to banks; and consumers still respond to rich offers. But the settlement marks a warning shot: as legal and commercial pressure builds to ease the burden on merchants, the lavish incentives that helped fuel the shift to plastic and digital payments are increasingly part of the bargaining. Over the coming years, the price of lower merchant fees may be paid, quietly and incrementally, in devalued points, higher card fees, more surcharges, and fewer frictionless freebies at the top of the wallet.

Conclusion

The Visa-Mastercard settlement is framed as a win for merchants. In dollars, it offers measured relief. In design, it’s something more: a crack in the system that channels huge swipe-fee revenues into ever-richer rewards. If that crack widens, through more rigid rules, bolder merchants, or future court decisions, the golden age of effortlessly generous credit card rewards will feel the strain.

For now, your points aren’t disappearing. But for the first time in a long time, they’re no longer untouchable. They’re on the negotiating table, and everyone from big retailers to big banks is reaching for a piece.