Visa and Mastercard on Monday rolled out a proposed $38 billion settlement to end a two‑decade legal slugfest over interchange, or “swipe,” fees charged when customers pay with plastic. The plan trims fees, loosens some long‑standing acceptance rules, and makes it easier for stores to pass card costs to customers. Major retail groups, though, say the givebacks are too skimpy. In Honolulu, where operating costs already run hot, merchants are eyeing the fine print to see if any real savings ever make it to the register.
What the deal would change
Under the proposal, the average interchange rate for U.S. credit‑card purchases would drop by 0.1 percentage point for five years, and “standard” consumer card rates would be capped at 1.25% for eight years, according to Reuters. Merchants could also accept different categories of Visa and Mastercard cards — commercial, premium consumer (those rewards heavyweights), and standard consumer — and in some situations tack on surcharges up to 3%, the court filing shows. Merchant attorneys say the $38 billion figure reflects projected reductions through 2031 calculated by economists hired for the case, including Joseph Stiglitz and Keith Leffler.
Merchants say the rollback is too small
Retail trade groups didn’t mince words. The National Retail Federation labeled the draft agreement “all window dressing and no substance” and urged Judge Margo Brodie to reject it, arguing a tiny basis‑point trim won’t fix systems that let banks centrally set fees, per an NRF press release. The Merchants Payments Coalition and small‑business advocates also warned that because most consumer cards are rewards cards, merchants may have limited ability to steer customers toward cheaper options.
Industry and banking groups back the deal
Banks and their allies counter that the settlement gives merchants — especially smaller shops — more flexibility and clarity. As reported by Reuters, Electronic Payments Coalition Executive Chairman Richard Hunt said the pact would cut fees beyond some proposed legislation and questioned whether merchants would turn savings into lasting price drops. “You tell me the last time Walmart reduced any of its prices by more than 25%, and kept it for eight years,” Hunt said, suggesting merchant behavior could blunt the deal’s impact.
Court approval remains uncertain
The agreement needs preliminary approval from U.S. District Judge Margo Brodie in the Eastern District of New York. She rejected an earlier $30 billion proposal in June 2024 as “paltry,” according to the Washington Post. If she declines again, the parties could be headed for trial — prolonging the fight and delaying any changes at checkout.
What local businesses should watch
Honolulu merchants should keep an eye on the Eastern District docket, watch how surcharging rules may be implemented, and note how card networks classify products at the point of sale. The Honolulu Star‑Advertiser is tracking the national settlement and local reaction, and will post updates if the court sets a fairness hearing or if major retailers object or drop out.
Bottom line: The proposed $38 billion package tweaks fees and acceptance rules, but it may not deliver the structural competition many merchants want. The real action comes with the judge’s preliminary approval decision — and any formal objections that follow.
