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Visa V-N and MasterCard MA-N announced a settlement with U.S. merchants related to swipe fees that could potentially save American shoppers tens of billions of dollars.

Swipe fees are paid to Visa, Mastercard and other credit card companies in exchange for enabling transactions. Merchants ultimately pass on those fees to consumers who use credit or debit cards. The fees are calculated as a fixed fee plus a percentage of the sales total, typically about 1 per cent to 3 per cent.

Increasingly in small businesses have begun posting signs near the register warning customers that they will pay more for the same item if they do not use cash.

According to the settlement announced Tuesday, Visa and Mastercard will cap the credit interchange fees into 2030, and the companies must negotiate the fees with merchant buying groups.

The law firm which announced the settlement put the value of the savings in swipe fees at close to $30-billion.

The settlement stems from a 2005 lawsuit which alleged that merchants paid excessive fees to accept Visa and Mastercard credit cards, and that Visa and Mastercard and their member banks acted in violation of antitrust laws.

In 2018 Visa and Mastercard agreed to pay $6.2-billion as part of the long-running suit filed by a group of 19 merchants. But the lawsuit then had two pieces that need to be resolved: a dispute over the rules Visa and Mastercard impose to accept their cards, and the merchants who chose not to participate in the settlement.

Visa said Tuesday that more than 90 per cent of the merchants in Tuesday’s settlement are small businesses. $15-million of the settlement will be allocated to merchants for education on the rule changes.

Mastercard did not acknowledge any improper conduct, which was part of the settlement, and the changes will take effects after approval of the settlement, most likely in late 2024 or early 2025.

The settlement is subject to final approval by the Eastern District Court of New York.

In early trading, Visa and Mastercard shares both edged down less than 1 per cent.

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