Open your merchant statement from five years ago and compare it to last month's. Odds are the "interchange" line has crept up, quietly, year after year — even though you never signed anything agreeing to pay more. That's not an accident. It's the result of a payment network duopoly setting fees with almost no competitive pressure, and small merchants footing the bill.
That era is finally facing a legal reckoning. After more than two decades of litigation, Visa and Mastercard have agreed to pay merchants billions of dollars and — more importantly for your business going forward — to change the rules that govern how much you pay to accept credit cards and what you're allowed to charge customers in return. If you run a business that swipes, dips, or taps cards, here's what actually changed, what's still pending, and what you need to do about it.
The Settlement, in Plain English
The legal fight goes back to a 2005 antitrust case (In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation) accusing Visa, Mastercard, and their issuing banks of fixing interchange fees and blocking merchants from steering customers toward cheaper payment methods. It has produced two separate settlements that merchants often confuse — worth untangling.
1. The historical damages settlement (already closed). Visa, Mastercard, and the bank defendants agreed to fund a pool of roughly $5.5 billion to compensate merchants that accepted their cards between January 1, 2004 and January 25, 2019. The claims-filing deadline passed in early 2025, so if your business didn't file, that door is shut. But if you did submit a claim, the money is still moving: the settlement fund made its first distribution of about $414 million to roughly 598,000 merchants, and a second distribution was court-approved in June 2026, expected to go out around September 2026. If you filed a claim years ago and forgot about it, it's worth checking the official settlement portal for your payment status rather than assuming the case fizzled out.
2. The prospective settlement (the one that matters now). This is the forward-looking piece — a roughly $38 billion deal covering interchange rates and merchant rules from 2026 onward, which received preliminary court approval. If finalized, it would cut average U.S. credit interchange rates by 10 basis points for five years and, critically, hand merchants new flexibility on surcharging, card acceptance, and fee negotiation that didn't exist before.
It's the second piece — the operating-rules changes — that most small business owners should actually pay attention to, because it changes what you're legally allowed to do at checkout.
What's New for Surcharging
Surcharging — adding a fee when a customer pays by credit card instead of cash or debit — has technically been legal in most states for years, but Visa and Mastercard's own network rules boxed it in tightly. The new settlement terms loosen those restrictions in a specific, useful way.
Brand-level or product-level, not both. Within 90 days of final settlement approval, Visa and Mastercard must let U.S. merchants choose to surcharge at either the brand level (all Visa credit cards, or all Mastercard credit cards) or the product level (say, only rewards or premium cards, which cost more to accept), but not mix both approaches for the same network at the same time. This matters because premium rewards cards routinely cost merchants 1–2 percentage points more in interchange than a plain-vanilla card — under the old rules you had to treat every card in a brand the same way, even though your actual cost of acceptance varied wildly.
The surcharge cap. A surcharge cannot exceed 3% of the transaction, or the merchant's actual cost of accepting that card, whichever is lower. If your blended cost of acceptance for a given card type is 2.4%, that's your ceiling — not 3%, even though 3% is the headline number most articles quote.
What you can't surcharge. Debit cards (including Visa debit) and prepaid cards remain off-limits for surcharging under both network rules and most state laws. This trips up merchants constantly — a surcharge program that doesn't correctly distinguish debit from credit at the point of sale is a common source of complaints and chargebacks.
Notice and disclosure requirements. Before you can start surcharging, you must give your acquirer (your payment processor or merchant bank) at least 30 days' written notice, specifying your business name and address, whether you're surcharging at the brand or product level, the surcharge percentage, and any third-party processor involved. At the point of sale, you're required to post clear signage at the entrance and at checkout, disclose the surcharge amount before the customer pays, and show it as its own line item on the receipt — not folded into the price.
State law still applies on top. Network rule changes don't override state law. A handful of states — Connecticut, Massachusetts, and a few others — still restrict or ban surcharging outright, and states like New York and California layer on their own disclosure requirements even where surcharging is allowed. If you operate in more than one state, each location needs to follow the rules where it's physically located, which means a multi-location retailer can't run one blanket surcharge policy nationwide without checking each jurisdiction first.
There's also a $15 million merchant education fund built into the settlement specifically to help small businesses understand and implement these changes, so expect to see more guidance materials roll out from processors and industry groups over the next year.
Should Your Business Actually Surcharge?
Just because you can surcharge doesn't mean you should — the math and the customer-experience tradeoffs differ a lot by business type.
It tends to make sense for:
- Businesses with thin margins and high card-processing costs relative to sale size (contractors, professional services, B2B invoicing)
- Businesses where customers already expect a card fee (some legal and medical practices, tow and towing-adjacent services)
- High-ticket transactions where even a small percentage is a meaningful dollar amount
It tends to backfire for:
- Consumer-facing retail and restaurants, where surcharges are more visible and more likely to trigger complaints or lost repeat business — competitors who absorb the fee will look cheaper at the register
- Businesses in states with strict disclosure rules, where a signage or receipt mistake can trigger real liability
- Any business not prepared to build the point-of-sale logic to correctly separate credit from debit and apply the surcharge consistently
A cash-discount or dual-pricing program — where you post one price for cash/debit and a slightly higher price for credit, rather than adding a fee at checkout — is a legally distinct alternative some merchants prefer because it tests better with customers even though the economics end up similar.
Getting the Bookkeeping Right
Whichever path you choose, the accounting matters more than most merchants realize, because surcharges and processing fees are not the same thing and shouldn't be recorded as if they were.
Surcharges are revenue, not an offset to expense. When a customer pays a surcharge, that's money coming into the business — it should post to its own income account (something like "Surcharge Revenue" or "Credit Card Surcharge Income"), separate from your core sales revenue. Lumping it into product or service sales inflates your top-line numbers and muddies any analysis of your actual sales trends.
Processing fees are a separate operating expense. What you pay your processor for accepting cards — interchange, assessments, markup — is a cost of doing business and belongs in its own expense account (e.g., "Merchant Processing Fees"), not netted against the surcharge revenue you collected. Some point-of-sale systems will net these automatically in the deposit that hits your bank account, which is convenient for cash-flow tracking but wrong for your income statement — you want gross surcharge revenue and gross processing expense visible separately, not collapsed into one number.
Why the distinction matters at tax time and beyond. Keeping these separate lets you actually answer the question a surcharge program is supposed to answer: is the extra revenue from surcharging outweighing the operational cost and any customer pushback? If everything is buried inside one blended "card fees" line, you lose the ability to evaluate whether the program is working — and your accountant loses the ability to reconcile your 1099-K gross payment totals against your books at year-end.
This is exactly the kind of thing that's easy to get sloppy with in a black-box accounting tool, and much easier to keep honest in a system where every transaction is a plain, auditable entry you wrote yourself. Beancount.io gives you plain-text, double-entry accounting where a surcharge and a processing fee are two distinct postings you can see, query, and reconcile line by line — no hidden netting, no vendor lock-in, and a full audit trail if a processor or a tax authority ever asks how you got to your numbers. Get started for free and see why developers and finance-savvy owners are moving their books to plain text.
What to Do Next
- Check your old claim status. If you filed for the historical damages settlement, log into the official portal and confirm your payment information is current before the next distribution round.
- Talk to your processor now, not later. Ask specifically what your blended cost of acceptance is by card type — you can't set a compliant surcharge without that number, and you need it 30 days before you can legally start surcharging.
- Check your state's rules before you build anything. A national surcharge policy that ignores state-by-state restrictions is a liability problem waiting to happen.
- Set up separate accounts before you flip the switch. Get "Surcharge Revenue" and "Merchant Processing Fees" onto your chart of accounts ahead of launch so your first surcharged transaction posts correctly instead of needing a cleanup later.
The interchange settlement won't eliminate card-processing costs — Visa and Mastercard aren't giving up their duopoly. But for the first time in years, small merchants have a real, rules-based lever to push some of that cost back where it's actually generated: onto the premium-card transactions that cost the most to accept.