MW Visa, Mastercard reach new settlement with merchants. Will it shake up credit-card rewards?
By Emily Bary
A proposed settlement in a long-running merchant lawsuit would give stores more freedom to block rewards cards, but it remains to be seen if they'd risk angering customers
Visa and Mastercard have reached a new proposed settlement in a merchant suit that dates back two decades.
A decadeslong lawsuit between Visa, Mastercard and a large cohort of merchants could finally be nearing its conclusion - with potential implications for shoppers if stores choose to limit their acceptance of rewards credit cards.
Visa (V) and Mastercard $(MA)$ each announced Monday morning that they reached a settlement agreement with a merchant group in a suit that stretches back to 2005. The agreement would see the card networks lower interchange fees over time and relax the "honor all cards" policy, which has made it so merchants accepting one card from Visa or Mastercard have to accept all cards from that network.
The Wall Street Journal first reported on the proposed settlement over the weekend.
The agreement has the potential to shake up credit-card rewards for consumers, since rewards cards incur higher fees for merchants. Currently, merchants can't discriminate between different cards offered by one of the networks, meaning that if they accept one card offered by Visa, they must accept all Visa cards. But the new agreement would give stores more flexibility if they wish broadly not to accept rewards cards.
Under the terms of the proposed settlement, cards would be grouped into three broad categories: commercial cards, premium consumer credit cards and standard credit cards. Merchants would have the option to accept all groups or just certain ones. What that means is that a store wouldn't be able to turn away, say, just the Chase Sapphire Reserve card, but would be able to turn away all premium cards.
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The premium category includes Visa Signature and Infinite cards as well as Mastercard's World, World Elite and World Legend cards. Consumers can see on their cards whether they have any of those labels.
It remains to be seen how such a rule would play out in practice, however, since merchants would have to determine whether blocking rewards cards in order to capture lower interchange fees is worth the risk of angering consumers who've grown accustomed to using their preferred cards essentially everywhere.
While Baird analyst David Koning said that part of the agreement is a possible negative for Visa and Mastercard, he also noted in a Sunday report that he thinks merchants "will largely accept all cards of a brand, given potential friction/confusion" at the point of sale. Koning's note, which was based on the Wall Street Journal's reporting on the proposed settlement, added that "higher-reward cards are often held by affluent consumers, and retailers won't want to upset them."
Visa's stock gained 0.4% in premarket trading on Monday, while Mastercard shares edged up 0.5%.
The deal is still subject to court approval, which was a roadblock to the last attempted settlement of the injunctive portion of this merchant suit. A judge determined that attempt didn't adequately address all elements of the suit. The parties worked with a mediator to address those concerns in this version.
A Visa spokesperson said the agreement would give merchants "meaningful relief, more flexibility and options to control how they accept payments from their customers."
Mastercard called the proposal "the best resolution for all parties, delivering the clarity, flexibility and consumer protections that were sought in this effort." A company spokesperson said that "smaller merchants will gain in this settlement - more acceptance choices, reduced costs and simplified rules."
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Other terms of this proposed settlement include more options for credit surcharging. Merchants will now be able to surcharge a network's cards by up to 3%, even if they don't surcharge other networks. The prior settlement iteration set a 1% cap for merchants that didn't surcharge other credit-card brands.
The settlement would also lower the networks' combined average effective credit interchange rates in the U.S. by 10 basis points for five years, whereas the prior attempt at a settlement allowed for a 7-basis-point reduction. What this means on a practical level is that the networks need to implement a 10-basis-point reduction and maintain it for five years.
The card networks set interchange rates, which are then paid by merchants' banks.
Meanwhile, for standard cards, interchange would be capped at 125 basis points, or 1.25%, for the term of the agreement, which lasts up to eight years. In practice, that means merchants could choose only to accept standard cards and thus only pay 1.25% in interchange. Some rewards cards have interchange fees well upwards of 2%, but merchants would have the option not to accept premium cards broadly.
For Visa and Mastercard, Koning saw various puts and takes to the deal, but the biggest positive is that "the overhang of uncertainty around the 20+ year litigation would be over."
Mizuho's Dan Dolev also said in a Sunday note to clients that a resolution could improve sentiment toward Visa and Mastercard shares while removing an overhang. He added that "the card issuers/banks are likely to see the lion's share of the impact" over the short term, though over a longer span there could be "some added friction" for Visa and Mastercard if merchants get more selective about the cards they accept.
-Emily Bary
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November 10, 2025 08:35 ET (13:35 GMT)
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