For once, Visa and Mastercard are the ones getting declined…

While everyone and their brother was glued to the news about Congress finally ending the government shutdown, two of the world’s biggest card networks quietly dropped a bombshell that actually affects every single one of us every time we swipe our cards. Visa and Mastercard finally threw in the towel, agreeing to a $38 billion “please-stop-suing-us” settlement with merchants who’ve spent decades accusing them of fixing swipe fees.

For the uninitiated, every time you swipe your card in the Starbucks drive-thru, the store has to pay a little toll to Visa or Mastercard… about 2.35% of your purchase. Doesn’t sound like much, but those little fees added up to roughly $111 billion last year. 

(Source: Reuters)

Merchants have been furious for decades, arguing that Visa and Mastercard were running an anticompetitive duopoly, especially thanks to their “Honor All Cards” rule. That rule meant if a store took one Visa, it had to take all of them… even the ultra-premium ones that reward you handsomely while quietly bleeding the merchant dry.

Now, after years of legal trench warfare, Visa and Mastercard are promising to make things right… or at least cheaper. They’ve agreed to lower swipe fees by 0.1 percentage point for five years, let merchants pick which types of cards they’ll take, and cap standard consumer rates at 1.25% for eight years. Plus, merchants will be allowed to tack on surcharges of up to 3% when customers pay by card. Translation: instead of “cash only,” your favorite Thai food place might just start charging extra for plastic.

Visa called it “meaningful relief.” Mastercard said small businesses will benefit the most. And both, of course, made sure to clarify they didn’t do anything wrong.

Retailers, however, aren’t exactly celebrating. The National Retail Federation called the 0.1% cut “a rounding error,” saying it barely takes fees back to where they were a year ago. Others argue the deal doesn’t stop Visa and Mastercard from quietly hiking rates again later… and that most merchants won’t dare stop accepting rewards cards because, well, people love their points. 

As one NRF lawyer put it: “You can’t suddenly tell 80% of your customers you won’t take their cards.” In other words: merchants are hostages, and we’re the reason they can’t escape.

That said, if this new deal gets approved, it’ll replace last year’s $30 billion proposal that a judge roasted as “paltry.” But don’t expect this one to magically lower prices… history shows that when card networks “give” something up, they find a way to get it back.

At the time of publishing this article, Stocks.News holds positions in Starbucks as mentioned in the article.