Merchants Reject $38B Credit Card Swipe Fee Deal: Loopholes Cited

Merchant Opposition Mounts Against $38 Billion Credit Card Swipe Fee Settlement

Every time you swipe, tap, or insert your credit card, the business pays a small percentage of your purchase to the card networks and banks—a cost known as a "swipe fee." While these fees may seem small, they add up to billions of dollars and are often passed on to consumers through higher prices. A proposed $38 billion settlement meant to resolve a long-running lawsuit over these fees is now facing massive opposition from merchants who say the deal does more harm than good for both businesses and their customers.

Widespread Merchant Opposition

A coalition of nearly 1,000 businesses and trade associations is formally asking a federal judge to reject the settlement with Visa and Mastercard. An objection letter with 978 signers—including retailers, restaurants, and convenience stores from all 50 states—was filed on September 10, arguing the deal provides only "temporary and meager relief" while giving the card giants "sweeping liability immunity."

The merchants, represented by groups like the Merchant Payments Coalition (MPC), claim they were not involved in negotiating the deal, which they say was arranged by a "handful of lawyers." This marks the third time a settlement has been attempted in this class action lawsuit, which originally began in 2005. Courts have already rejected two previous proposals, signaling deep-rooted issues with finding a fair resolution.

Inadequate Relief and Hidden Loopholes

At the heart of the opposition are concerns that the settlement's proposed benefits for merchants are minimal and short-lived. The deal offers a tiny reduction in interchange fees—just one-tenth of a percentage point. Opponents argue this would only return the average swipe fee of 2.36% back to its 2023 level, offering no meaningful long-term savings.

Furthermore, this small fee reduction would only last for five years. In contrast, the settlement includes a ban preventing merchants from filing future lawsuits against the card networks for an "alarmingly uncertain" amount of time. Merchants fear this would allow Visa and Mastercard to raise fees again after the five-year period without facing legal challenges.

Unworkable Changes to Card Rules

The settlement also proposes changes to card acceptance rules that businesses call unrealistic and ineffective. One provision would adjust the "honor all cards rule," theoretically allowing merchants to decline to accept high-fee premium rewards cards. However, with over 90% of all credit card spending now happening on these types of rewards cards, businesses say they cannot realistically reject them without losing the vast majority of their customers.

Another proposal would cap swipe fees on "standard" cards at 1.25%, but critics point out that these basic cards make up a "small and shrinking fraction of the market." Banks could simply re-categorize cards to avoid the cap. The settlement also includes a provision for a credit card surcharge of up to 3%, but complex state laws and network rules make this "effectively unworkable" for most businesses.

The Staggering Financial Impact

The fight over swipe fees stems from their significant impact on businesses' bottom lines—costs that are ultimately baked into the prices consumers pay. This lawsuit, ongoing since 2005, alleges that Visa and Mastercard use their market dominance to violate antitrust laws and artificially inflate these fees. The financial strain is immense; according to the 2026 CSNews Industry Report, the average credit card fees paid by a single convenience store rose 9.6% in one year, reaching $247,729 in 2025. For these stores, card fees are their second-highest operating cost after wages.

These individual business costs are part of a much larger picture. As a recent report details, total credit & debit card swipe fees neared $200B in 2025, highlighting the scale of the money flowing from merchants to financial institutions.

What Happens Next?

Despite the widespread objections, the proposed settlement received preliminary approval from a judge back in June. Now, the court must consider the arguments from hundreds of merchants and decide whether to grant final approval or reject the deal for a third time.

For consumers, the outcome is significant. Merchants argue that if the settlement is approved, it will lock in an anticompetitive system that keeps swipe fees high, ensuring that the hidden cost of credit card rewards continues to be passed on to everyone in the form of higher retail prices. The court's final decision will shape the landscape of payment processing costs—and their effect on your wallet—for years to come.