Every time you tap your card at a store, a small fee moves in the background. You do not see it. The cashier does not mention it. The receipt does not show it. But the merchant who sold you your coffee, your groceries, your shoes, paid it. In the United States, that fee averaged 2.35% of the transaction value in 2024. On a ten dollar coffee, that is about twenty-three cents. On a hundred dollar grocery run, it is two dollars and thirty-five cents. On a billion dollars in annual card sales, it is twenty-three and a half million dollars, gone to the card networks and the issuing banks before the merchant sees a penny of profit.
This fee is called interchange. And the argument about who it serves, and whether it is fair, and what should happen to it, has been running in American courtrooms for over twenty years.
The latest chapter arrived in November 2025, when Visa and Mastercard reached a proposed settlement with merchants. The headline number was a reduction of ten basis points, which is a tenth of a percentage point, off the average interchange rate, for five years. The merchant community’s response was, in many cases, to say this was not nearly enough. Walmart, the National Restaurant Association, Nike, and the National Association of Convenience Stores were among those who filed objections. The convenience stores said it plainly: the settlement would give Visa and Mastercard legal immunity to continue their practices, in exchange for what amounted to rolling fees back by about one year’s worth of increases. Swipe fees have tripled since 2010. A tenth of a point off the top is not reform. It is optics.
To understand why merchants feel this way, you have to understand how the card system is actually structured. Visa and Mastercard do not issue cards themselves. They operate the networks — the rails over which transactions travel. The cards are issued by banks: JPMorgan Chase, Bank of America, Citibank, Capital One. These issuing banks receive the interchange fee. Visa and Mastercard set the interchange schedules and enforce the rules that merchants must follow if they want to accept cards at all. Among those rules, historically, has been the requirement to accept every card branded with the network logo, regardless of its interchange cost. A merchant who takes Visa must take the basic Visa card and also the premium Visa Infinite card, even though the Infinite card carries a higher interchange rate. The merchant has no say in which cards their customers carry.
The growth of premium rewards cards has made this particularly painful. These cards offer airline miles, cashback, hotel points, all funded largely by interchange revenue. The more rewards a card offers, the higher its interchange rate tends to be. As consumers have migrated toward premium cards because of the rewards, merchants have found themselves paying increasingly higher fees without any choice in the matter. The proposed settlement does give merchants more ability to decline certain high-cost cards, and to add a surcharge for customers using premium cards. Whether merchants will actually use these tools at scale is a separate question, because surcharging premium cards tends to irritate customers, and merchant-customer relationships are something merchants care about too.
There is a political angle here worth acknowledging. The card networks and the issuing banks argue that interchange funds the fraud protections, the rewards programs, and the infrastructure that make card acceptance attractive for everyone. They say that large cuts in interchange would hurt cardholders, because issuers would scale back rewards. This argument has been effective. Consumer advocacy groups have not, in general, been the loudest voices in the interchange debate, partly because the direct consumer harm is diffuse and invisible. The merchant who pays two percent more absorbs some of it into their margin and passes some of it through to prices. The consumer who shops there pays a little more across thousands of purchases over years. The connection between the card fee and the higher grocery bill is real but almost impossible to trace.
What makes this debate interesting beyond its legal and political dimensions is what it reveals about the underlying architecture of the payments industry. A small number of networks set the price of something used in virtually every retail transaction in the country, and the merchants who rely on those networks have very limited ability to negotiate or to opt out. The alternative payment rails, account-to-account transfers, bank transfers, and the like, have not yet scaled to the point where they represent a real competitive threat to the card networks for everyday retail. Until they do, the networks operate with a kind of pricing power that is unusual even by the standards of other heavily networked industries.
The court settlement still needs approval, which is not guaranteed given the volume of merchant opposition. If it is rejected, the litigation that began in 2005 continues. What is more likely to shift the landscape, over time, is not a courtroom settlement but the gradual maturation of real alternatives. When paying by bank transfer is as frictionless and ubiquitous as tapping a card, merchants will have leverage they currently do not have. That moment is probably not as far as it once seemed. But it has also been described as imminent for quite a few years now, and the card networks are still here, their fees still intact, and the courtroom fight still going.
For anyone working in the payments industry, the interchange story is a useful reminder that infrastructure has power. Whoever controls the rails tends to collect the toll. The question of who should control them, and under what rules, and at what price, is not a technical question. It is a question about fairness in the design of economic systems. That question rarely gets a clean answer. But the fact that it is being asked, loudly and persistently, by retailers ranging from small convenience stores to Walmart, suggests that the current arrangement is not one the merchant community intends to accept as permanent.
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