Federal Judge Preliminarily Approves $38 Billion Visa-Mastercard Settlement, Ending 'Honor-All-Cards' Rule

Every time a consumer taps a credit card at a checkout counter, a quiet financial transaction occurs behind the scenes, siphoning a small percentage of the sale to banks and payment networks. For over two decades, millions of American merchants have fought a bitter legal war against Visa and Mastercard over the scale of these "swipe fees." Now, that battle has reached a historic turning point. On June 9, 2026, U.S. District Judge Brian Cogan granted preliminary approval to a revised $38 billion settlement between the payment giants and a class of more than 12 million U.S. merchants.[1][2]

The ruling, handed down in the Eastern District of New York, aims to resolve antitrust litigation that first began in 2005. Judge Cogan deemed the massive agreement "fair, reasonable, and adequate," signaling a likely path to final approval. The settlement arrives nearly two years after a previous $30 billion proposal was rejected by the courts for being too small and too narrow to provide meaningful relief to retailers.[1][2][5]

To understand the magnitude of this settlement, one must look at the sheer volume of money moving through the credit card ecosystem. According to the Merchants Payments Coalition, Visa and Mastercard swipe fees in the United States reached a staggering $118.8 billion in 2025, representing a 6.8% increase from the previous year. These fees, officially known as interchange, have become one of the fastest-growing expense categories for American businesses.[3][5]

The most consequential element of the $38 billion deal is not a monetary payout, but the dismantling of a foundational pillar of the credit card industry: the "Honor-All-Cards" rule. For decades, this network mandate forced merchants into an all-or-nothing proposition. If a local bakery wanted to accept a basic Visa debit or credit card, network rules legally bound them to also accept Visa's ultra-premium rewards cards.[1][4]

This dynamic created a hidden imbalance. Standard consumer credit cards carry relatively modest interchange rates. However, premium cards—such as Visa Infinite or Mastercard World Elite—carry significantly higher processing fees, often running 15 basis points or more above standard rates. These elevated fees are exactly what fund the lucrative travel points, lounge access, and cash-back rewards that affluent consumers enjoy.[4][5]

Under the old rules, merchants were effectively forced to subsidize these premium rewards programs, absorbing the higher processing costs without the ability to decline the expensive cards. The newly approved settlement structurally changes this dynamic. For the first time, merchants will gain the right to decline specific premium and commercial card categories while continuing to accept standard cards.[4][5]

The mechanics of this newfound freedom will require technological adaptation. Point-of-sale systems will need to be updated to identify a card's tier—standard versus premium—in real-time as it is tapped or swiped. While the exact implementation details are still being finalized, the shift transfers significant leverage from the payment networks back to the storefront.[1][5]

Beyond the right of refusal, the settlement dramatically expands merchants' rights to pass costs directly to the consumer. Businesses will gain greater flexibility to apply surcharges of up to 3% on credit card transactions. Crucially, merchants can apply these surcharges at either the brand level or the specific product level, meaning a customer paying with a high-fee rewards card could face a higher checkout total than someone using a basic card.[3]

While the structural rule changes are the centerpiece of the deal, the settlement also includes direct, albeit temporary, financial relief. Visa and Mastercard have agreed to reduce the combined average effective credit interchange rate by 10 basis points (0.1%) across the board. This reduction will remain in place for a period of five years.[4][6]

Furthermore, the networks have agreed to a rate cap. Standard consumer credit card interchange rates will be capped at 1.25% for at least eight years. This provides a ceiling of predictability for small businesses that have watched processing costs climb relentlessly over the past decade.[6][8]

Despite these concessions, the reaction from the retail community has been deeply divided. Major industry groups, including the National Retail Federation and the National Association of Convenience Stores, have publicly criticized the deal. They argue that the settlement fails to address the fundamentally "broken" nature of the credit card market and leaves the Visa-Mastercard duopoly largely intact.[2]

Payment consultants share some of this skepticism regarding the rate cuts. Analysts note that a 10 basis point reduction represents only a roughly 4% drop from the average credit card processing fee, which hovered around 2.36% in 2025. Critics argue this minor reduction merely rolls back a year or two of recent fee hikes, doing little to offset the 71% surge in interchange costs seen since 2019.[3][5]

Conversely, proponents of the settlement view it as a monumental victory for market-driven solutions. Advocates highlight that the plaintiffs' own economic experts estimate the deal will generate $224 billion in total benefits for merchants and consumers over time. They argue that achieving this relief through the judicial system proves that federal legislative intervention is unnecessary.[6]

This argument has immediate political implications in Washington. For years, retail groups have lobbied Congress to pass the Credit Card Competition Act (CCCA), a bill designed to force competition into the payment network routing process. Opponents of the bill are now pointing to the $38 billion settlement as "Exhibit A" for why Congress should stand down and let the courts regulate the industry.[6]

For the average consumer, the ripple effects of this settlement will likely become visible at the checkout counter in the coming years. The era of seamless, universal acceptance for premium rewards cards may be drawing to a close. Shoppers could soon encounter signs indicating that a store only accepts standard credit cards, or digital prompts warning of a 3% surcharge for using a premium travel card.[5]

This friction could eventually threaten the economics of the credit card rewards ecosystem. If a critical mass of merchants exercises their new right to decline high-fee cards, consumers may find their expensive metal cards less useful for everyday purchases. In turn, issuing banks would collect less interchange revenue, potentially forcing them to devalue points programs or increase annual fees.[5]

None of these changes will happen overnight. The settlement is currently in the preliminary approval phase and must still navigate a class-notice period, a final fairness hearing, and likely appeals from objecting retail groups. Industry experts project that the realistic timeline for any rate reductions or rule changes to appear on merchant processing statements is late 2026 at the earliest, and more likely 2027.[4]

Until then, the $38 billion agreement stands as the most significant restructuring of the American payments landscape in decades. By severing the "Honor-All-Cards" mandate, the courts have fundamentally altered the balance of power between the storefronts that sell goods and the financial networks that process the payments.[3]