The credit card fee lawsuit is a massive legal battle involving Visa and Mastercard that could reshape how merchants pay for accepting credit card payments. As of April 2026, a proposed $38 billion settlement sits under federal court review, with U.S. District Judge Brian Cogan hearing arguments in Brooklyn on whether to grant preliminary approval. The judge indicated plans to rule quickly on this landmark case, which could affect billions of dollars in swipe fees charged to retailers every year.
For example, when a grocery store processes a customer’s Visa transaction, a portion of that sale goes to Visa and Mastercard as an interchange fee—these fees have grown so substantial that major retailers are fighting back through the courts. The lawsuit centers on accusations that Visa and Mastercard illegally conspired to set artificially high interchange rates, which are the fees merchants must pay when customers use credit cards. These fees have ballooned into a massive revenue stream: in 2025 alone, Visa and Mastercard swipe fees in the United States totaled $118.8 billion. The proposed settlement would reduce those rates and give merchants more control over which payment cards they accept, but retailers argue the terms don’t go far enough to address decades of anticompetitive conduct.
Table of Contents
- HOW DID THE CREDIT CARD FEE LAWSUIT BEGIN?
- THE SETTLEMENT TERMS AND WHAT THEY ACTUALLY MEAN
- WHY ARE MAJOR RETAILERS OPPOSING THE SETTLEMENT?
- HOW WOULD THE SETTLEMENT AFFECT CONSUMERS AND SMALL MERCHANTS?
- THE ILLINOIS SWIPE FEE LAW AND BROADER REGULATORY CHALLENGES
- TIMELINE AND WHERE THE SETTLEMENT STANDS NOW
- WHAT HAPPENS IF THE SETTLEMENT FAILS AND THE CASE GOES TO TRIAL?
- Conclusion
HOW DID THE CREDIT CARD FEE LAWSUIT BEGIN?
The lawsuit isn’t new—it represents decades of merchant frustration with payment card networks that control an estimated $118.8 billion in annual interchange fees. Merchants of all sizes have complained that they have no negotiating power with Visa and Mastercard because of the “Honor All Cards” rule, which forces them to accept all cards in a brand’s portfolio, including expensive premium and commercial cards. The case was originally proposed for settlement in November 2025, but the settlement process has dragged into 2026 as Judge Cogan carefully reviews whether the terms adequately compensate merchants for past violations.
The legal battle involves complex questions about whether Visa and Mastercard violated antitrust laws by fixing interchange rates. At its core, the argument is straightforward: if Visa and Mastercard set rates together rather than allowing them to be determined by true market competition, merchants have been overcharged for decades. A small electronics retailer, for instance, might pay 2% or more of every credit card transaction to cover interchange fees—costs that either reduce profit margins or get passed to consumers through higher prices. This compounds quickly when you’re processing thousands of transactions monthly.
THE SETTLEMENT TERMS AND WHAT THEY ACTUALLY MEAN
The proposed settlement includes significant but contested fee reductions. Visa and Mastercard would reduce interchange rates by 10 basis points (0.10%) for five years—a reduction that sounds meaningful but represents a small fraction of current fees. Additionally, the settlement would cap the interchange rate for standard consumer credit cards at 1.25% for eight years. While these changes would reduce merchant costs, retailers argue the reductions are too modest given the scale of past overcharges and the limitations on how long they would last.
one major change in the settlement is the relaxation of the “Honor All Cards” rule. Merchants would gain the explicit right to decline premium cards, commercial cards, and other high-interchange products from Visa and Mastercard’s portfolios. This is significant because merchants could theoretically refuse to accept Visa Signature or Mastercard Premium cards, which carry much higher fees (sometimes 3% or more) than standard cards. However, a limitation to this concession is that merchants still cannot fully opt out of Visa or Mastercard networks—they can only be selective within the networks.
WHY ARE MAJOR RETAILERS OPPOSING THE SETTLEMENT?
Walmart, the National Retail Federation (NRF), and the Retail Industry Leaders Association (RILA) have all publicly opposed the settlement, arguing that it doesn’t adequately address the scope of the illegal conduct and that merchants should have their day in trial. These major retailers contend that the proposed reductions are too insubstantial and too easily undermined through other fee mechanisms or network policies. Walmart alone processes hundreds of millions of transactions annually, so even small differences in interchange rates translate to massive financial impacts for the company.
The retailers’ position reflects a deeper frustration: they want actual damages for past overcharges, not just prospective rate reductions. Consumer advocacy groups have echoed this sentiment, arguing that the settlement is “too insubstantial and too susceptible to undermining.” For example, even if interchange rates are reduced by 10 basis points, Visa and Mastercard could theoretically introduce new fees or assessments that offset those reductions. The comparison is often made to tobacco settlements or pharmaceutical cases where plaintiffs accepted reduced rates but later discovered workarounds that limited the actual benefit.
HOW WOULD THE SETTLEMENT AFFECT CONSUMERS AND SMALL MERCHANTS?
Consumers might see modest benefits if retailers pass along savings from lower interchange fees through reduced prices or fewer surcharges, though this is far from guaranteed. Small merchants would likely benefit more directly because every basis point of reduction compounds across thousands of transactions. A small restaurant processing $10,000 in credit card sales daily would save approximately $36 per day under the 10 basis point reduction—roughly $13,000 annually. However, that same restaurant would still pay substantial interchange costs, so the settlement wouldn’t eliminate the burden entirely.
The settlement’s impact on merchants’ ability to decline high-fee cards remains unclear in practice. While the terms theoretically allow merchants to refuse premium cards, consumer expectations and the practical realities of payment processing mean most retailers will continue accepting them. A coffee shop, for instance, could theoretically decline to accept Visa Infinite or Mastercard Titanium cards, but doing so might frustrate customers and push business to competitors who accept all cards. The tradeoff is between losing customers and paying higher fees—a choice that many small businesses will likely resolve by accepting all cards anyway.
THE ILLINOIS SWIPE FEE LAW AND BROADER REGULATORY CHALLENGES
A parallel case adds complexity to the credit card fee landscape. As of April 27, 2026, a federal agency asserted that Illinois cannot limit swipe fees for federally chartered banks, contradicting an earlier federal judge ruling that Illinois could impose fee limits. The 7th Circuit Court of Appeals is scheduled to hear oral arguments on this issue on May 13, 2026.
This regulatory uncertainty creates a warning for merchants and payment processors: even as the federal settlement progresses, state-level regulations around swipe fees remain unsettled and contested. The Illinois case is particularly important because it raises the possibility that states could independently regulate interchange fees—potentially creating a patchwork of different fee structures across the country. If Illinois prevails and other states follow, merchants might face the burden of complying with multiple fee structures depending on where they operate. Conversely, if the federal preemption argument wins out, merchants may remain locked into national standards set by Visa and Mastercard, with only the proposed settlement to rely on for relief.
TIMELINE AND WHERE THE SETTLEMENT STANDS NOW
Judge Brian Cogan heard arguments on preliminary approval on April 28, 2026, and has indicated he plans to rule quickly. The preliminary approval stage determines whether the settlement can proceed to notification to the class of merchants and eventual final approval. If approved, merchants would be notified of their eligibility to claim past damages and the settlement’s terms.
The process typically takes several months from preliminary approval to final court approval and the beginning of claim distributions. The settlement has been pending since it was originally proposed in November 2025, which means merchants have been waiting more than five months for movement. Any delay in Judge Cogan’s ruling means the merchant class remains in limbo regarding whether they’ll receive settlement payments for alleged past overcharges or whether the case will head to trial.
WHAT HAPPENS IF THE SETTLEMENT FAILS AND THE CASE GOES TO TRIAL?
If retailers and their representatives reject the settlement or Judge Cogan denies preliminary approval, the case would proceed toward trial. This would be a lengthy and expensive process, potentially stretching years into the future. A trial victory for merchants could result in larger damages awards or more favorable terms, but it’s also risky—merchants could lose and receive nothing. The settlement represents something closer to a guaranteed outcome, even if imperfect.
The broader implications of this case extend beyond just the settlement terms. A trial victory or further settlement negotiations could reshape the entire payment card industry, potentially forcing networks to abandon the “Honor All Cards” rule entirely or implement more transparent fee structures. The case has already brought unprecedented attention to interchange fees, and regulators in multiple countries are watching the U.S. proceedings closely. The Illinois swipe fee law case adds another layer of potential change, suggesting that even if the federal settlement succeeds, regulatory pressure on card networks is likely to continue.
Conclusion
The credit card fee lawsuit represents one of the most significant challenges to Visa and Mastercard’s fee structure in decades. The proposed $38 billion settlement would reduce interchange rates modestly and grant merchants more selective control over which cards to accept, but major retailers are arguing for trial to seek larger damages. Judge Cogan is expected to rule quickly on preliminary approval, which would move the settlement toward a vote by the affected merchant class.
If you’re a merchant or part of an organization affected by credit card fees, monitoring this settlement’s progress is important. The outcome will determine whether you receive compensation for past overcharges and what your payment processing costs will look like for the next five to eight years. Keep an eye on Judge Cogan’s ruling and the May 2026 Illinois case oral arguments—both will shape the future of credit card fees in America.