Visa Mastercard Settlement Hearing November 16: Build the Card-Fee Ledger by Location, Price the 3 Percent Surcharge Net of Sales Tax and Fees, and Decide State by State

The Visa Mastercard settlement goes to its final approval hearing on November 16, 2026. If approved, restaurants could decline premium cards and surcharge credit transactions up to 3 percent. Before that order lands, a multi-location operator needs one number per location: the effective card fee rate, grossed up from net deposits, split credit from debit.

Why this matters now

On 2026-10-16 Payments Dive reported that U.S. District Judge Brian Cogan will hold the final approval hearing on November 16, 2026 in Brooklyn. Visa and Mastercard had just filed a joint reply saying that objectors, including Walmart, the National Retail Federation and the Retail Industry Leaders Association, were recycling arguments the court already rejected. The class covers more than 12 million U.S. merchants. The same judge granted preliminary approval on 2026-06-09, and the National Association of Convenience Stores said then that it would appeal if final approval is granted.

The terms themselves were filed with the SEC on 2025-11-10. The settlement agreement attached to Mastercard's 8-K commits the networks to a combined average effective U.S. credit interchange rate at least ten basis points lower for five years, caps standard consumer credit interchange at 125 basis points, lets a merchant decline commercial, premium consumer, or standard consumer credit cards as whole categories, and lets a merchant surcharge credit transactions at brand level or product level, not both, up to the lower of 3 percent or its actual cost of acceptance. A merchant may surcharge Visa and not Mastercard, or the reverse. Visa's own 8-K, same date, states the 10 basis point reduction, the 125 basis point cap through the term of the agreement, the three acceptance categories, and that the settlement is subject to court approval.

Why a restaurant should care about a 10 basis point cut: Payments Dive puts the 2024 average Visa and Mastercard fee at 2.35 percent of transaction value, and FastCasual, quoting the National Restaurant Association on 2025-11-13, puts restaurant pre-tax margins at 3 to 5 percent. The Association called the relief token and temporary. Whether or not that is fair, the arithmetic for an operator is the same: the rate cut is small, the surcharge and decline rights are large, and both only matter if you know what each location pays today.

What the settlement changes and what it does not change for a restaurant

Three things change if the order is entered and survives appeal. Interchange, which is one component of what your processor charges you, falls a little. A standard consumer credit card's interchange gets a ceiling. And the honor-all-cards rule loosens, so a restaurant could refuse premium consumer cards, or commercial cards, as a category, and could surcharge one brand and not the other.

Three things do not change. Your processor's markup is not in the agreement, so a flat-rate plan at 2.6 percent plus 10 cents may not move at all unless the processor chooses to pass the cut through. State law still governs whether you may surcharge: LawPay's state summary, updated 2026-10-20, lists Connecticut, Maine, Massachusetts, and Puerto Rico as prohibiting surcharges, Colorado as capping them at the lower of 2 percent or actual cost, and New York as requiring the full credit price in dollars and cents before the sale. And network surcharge rules already exist today. An ArentFox Schiff alert from 2023-07-24 sets out Visa's current rule: the surcharge is capped at the lower of 3 percent or the merchant discount rate for that card, applies to credit only and never to debit or prepaid, requires 30 days' written notice to your acquirer, and must be disclosed at the point of sale. The settlement widens how you can surcharge. It does not create the right.

One more fact that competitor coverage tends to leave out: a surcharge is part of the sale. California's tax authority says it plainly in Annotation 295.2000: the surcharge is part of the consideration for the sale and therefore part of gross receipts subject to sales tax. Other states reach the same answer through their own guidance. That changes the entry, the POS configuration, and the math on what a surcharge actually recovers.

Build the card-fee ledger by location

Most restaurant ledgers don't know the card fee rate because the processor deposits net. Sales post from the POS at gross, the bank feed brings in the deposit, and the difference either sits in a clearing account nobody reconciles or gets lumped into bank charges. The build below fixes that for one location, then repeats.

Call the location Oak Street, in a state that allows surcharging and taxes it as part of the sales price at a combined 8 percent. The figures are illustrative; the sequence is the point.

Step one: gross up the fees

The October processor statement shows $205,000 of card volume, which includes sales tax and tips charged to cards, $4,920 of fees, and $200,080 deposited. The POS daily sales summaries already posted the $205,000 to the card clearing account. The entry that closes the month is a debit to card processing fees of $4,920 and a credit to card clearing, so clearing returns to the undeposited balance and the fee shows on the profit and loss as its own line. Effective rate: $4,920 divided by $205,000 is 2.40 percent.

Step two: split credit from debit

The statement breaks volume by card type. Credit was $133,250 with $3,730 of fees, a 2.80 percent effective rate. Debit was $71,750 with $1,190 of fees, 1.66 percent. The statement also shows the share of credit that ran on premium consumer and commercial cards: 38 percent, or about $50,600. Those are the cards a merchant could decline or surcharge at product level under the settlement, and the cards that drive the 2.80 percent.

Step three: model the settlement's own relief

Ten basis points on $133,250 of credit volume is $133 a month at Oak Street, about $1,600 a year, and only if the processor passes it through. On an interchange-plus plan it should appear as a lower interchange line. On a flat-rate plan it appears only if the processor reprices. The 125 basis point cap applies to standard consumer interchange, again one component of the 2.80 percent, so the statement has to itemize interchange before anyone can say what the cap is worth.

Step four: model a surcharge net of tax and fees

Oak Street's cap is the lower of 3 percent or its 2.80 percent credit cost, so the ceiling is 2.80 percent. Say the owner picks 2.5 percent on credit at brand level. Three things happen that a headline calculation misses. The surcharge itself is charged to the card, so the processor takes 2.80 percent of it. The surcharge is taxable, so the POS must apply the 8 percent to the surcharged subtotal and the tax is remitted, not kept. And some guests switch to debit or cash, which carries no surcharge but costs less to accept.

Assume 15 percent of credit volume moves to debit. Remaining credit is $113,262, so the surcharge is $2,832 a month. The processor's fee on that surcharge is $79. The $19,988 that moved to debit saves the 1.14 point gap between the credit and debit rates, or $228. Net monthly recovery is $2,832 plus $228 less $79, about $2,981, against total card fees of $4,920. That is roughly 61 percent of Oak Street's card cost, and about twenty times the settlement's rate cut. The tax collected on the surcharge, about $227 a month at 8 percent, flows through sales tax payable and is neither income nor cost.

Step five: the entries for one check

A $100 food and beverage check paid by credit card: surcharge at 2.5 percent is $2.50, applied to the pre-tax subtotal because that is the rule the owner wrote down. Sales tax at 8 percent on $102.50 is $8.20. The guest is charged $110.70. The daily sales entry debits card clearing $110.70 and credits food and beverage sales $100.00, surcharge income $2.50, and sales tax payable $8.20. At settlement the processor takes 2.80 percent of $110.70, or $3.10: debit bank $107.60, debit card processing fees $3.10, credit card clearing $110.70. Without the surcharge the same check would have cost $3.02 to accept. The surcharge recovered $2.50 of a fee that rose by eight cents. Surcharge income is revenue, a credit, and it stays separate from the fee expense so both can be read on their own.

Step six: repeat by location and by state

The table is why the decision cannot be one group policy. The same 2.5 percent that is lawful at Oak Street is unlawful at Harbor and over the cap at Ridge. The per-location structure that holds these numbers is the one in the multi-location restaurant profit and loss guide, and the daily sales entry that feeds card clearing is the one in the POS reconciliation guide.

Accounting controls for card fees and surcharges

Source data: the monthly processor statement for each location, with volume, fees, and deposits by card brand and by card type (credit, debit, premium consumer, commercial); the POS daily sales summaries with tender split and, once a surcharge is live, the surcharge line and the tax computed on it; the state of each location and its written surcharge rule; the 30-day acquirer notice with its date; the point-of-sale disclosure as posted; and the processor pricing schedule, interchange-plus or flat-rate.

Calculation: a fixed sequence anyone can re-perform. Effective rate equals statement fees divided by statement volume, after fees are grossed up from net deposits. Credit rate and debit rate are computed separately. The settlement rate cut is ten basis points times credit volume, counted only where the pricing schedule passes interchange through. Surcharge recovery equals surcharge income on the credit volume that stays, plus the rate gap on the volume that migrates, less the processor's fee on the surcharge; sales tax on the surcharge is excluded from recovery. Polarity is the first check: sales and surcharge income are credits and flows for the period; processing fees are debits and flows; sales tax payable is a credit and a point-in-time liability; card clearing is an asset that must return to the undeposited balance after every settlement.

Review: a second person ties statement fees to the general ledger fee account by location and lands within rounding; gross card sales plus surcharge less fees equals the bank deposits for the month; surcharge income times the tax rate agrees to the tax the POS collected on surcharges; the effective rate by location moves no more than 15 basis points month over month without a written reason; every surcharging location has an acquirer notice older than 30 days and a disclosure photo on file; no debit or prepaid transaction carries a surcharge.

Decision: the owner or operating partner sets the surcharge, discount, or decline policy per state, in writing, with the rate and whether it applies before or after tax and tips. Each general manager owns the POS configuration and the posted disclosure at their store. Finance owns the card-fee ledger, the monthly recovery model, and the page the owner reads before the policy changes.

Limits and common mistakes

The settlement is not final. The hearing is November 16, 2026, the judge can deny approval, and at least one trade group has said it will appeal. Nothing in the agreement changes a state ban, a state cap, or Visa's existing rules, which already cap a surcharge at the lower of 3 percent or cost and require 30 days' notice. Oak Street, Harbor, and Ridge are illustrative, and the 15 percent migration assumption is a planning number to be replaced by your own tender data after the first month.

The first mistake is reading the fee rate off the profit and loss. If the processor deposits net and nobody grosses up, the ledger understates both sales and fees and the rate is invisible.

The second is netting the surcharge against fee expense. The surcharge is revenue and, in many states, taxable revenue. Booking it as a credit to processing fees hides taxable sales and misstates both lines.

The third is applying one policy to every location. A rate that is lawful in one state is prohibited next door, and the 2 percent cap in Colorado is below Oak Street's 2.5 percent.

The fourth is surcharging debit. Network rules forbid it, and a POS that surcharges by tender type rather than by card type will do it by accident.

The fifth is counting the rate cut as money in the bank. Ten basis points reaches a flat-rate merchant only if the processor reprices, and the 125 basis point cap applies to interchange, not to the all-in rate on the statement.

Frequently Asked Questions

What happens at the Visa Mastercard settlement hearing on November 16, 2026?

U.S. District Judge Brian Cogan in Brooklyn will decide whether to grant final approval to the revised settlement between Visa, Mastercard, and a class of more than 12 million U.S. merchants. He granted preliminary approval on June 9, 2026. Walmart, the National Retail Federation, and other merchant groups have objected, and at least one trade group has said it will appeal if the settlement is approved, so the terms could take time to reach a restaurant's statement.

Can a restaurant start surcharging credit cards before the settlement is final?

Yes, where state law allows it. Visa's existing rules cap a surcharge at the lower of 3 percent or the merchant discount rate for that card, limit it to credit cards, require 30 days' written notice to the acquirer, and require disclosure at the point of sale. Connecticut, Maine, Massachusetts, and Puerto Rico prohibit surcharges, Colorado caps them at the lower of 2 percent or actual cost, and New York requires the full credit price posted in dollars and cents.

Is a credit card surcharge recorded as revenue or as a reduction of processing fees?

As revenue. The surcharge is part of the price the guest pays for the meal, so it is credited to its own income account, and in many states it is part of taxable gross receipts; California's Annotation 295.2000 says so directly. Processing fees stay in their own expense account. Netting the two hides taxable sales and makes the true cost of card acceptance impossible to read.

Will the 10 basis point interchange cut show up on a restaurant's processor statement?

Only if the processor passes it through. Interchange is one component of the rate a restaurant pays. On an interchange-plus plan the cut should appear as a lower interchange line. On a flat-rate plan the processor's price is fixed, so the restaurant sees a change only if the processor reprices. At $133,250 of monthly credit volume the cut is worth about $133 a month, which is why the surcharge and decline decisions matter more than the cut itself.

How do you find the effective card fee rate for each restaurant location?

Take the monthly processor statement for the location, divide total fees by total card volume, and post the fees to the ledger as an expense so the deposit is grossed up. Then repeat the division for credit and debit separately, and note the share of credit that ran on premium consumer and commercial cards. Do this for every location before setting a surcharge rate, because the rate cap is tied to each location's own cost of acceptance.

Once each location's effective rate, credit share, and surcharge recovery sit on one page, the November 16 decision stops being a guess about what the card networks will do and becomes a per-store policy the owner can defend. FinBoard reads each location's QuickBooks file, or each class in a shared file, into one view, so card processing fees, surcharge income, and sales tax payable by location sit beside the deposits they reconcile to and every figure drills to the daily entry behind it. See how FinBoard puts every location's card-fee ledger on one page.