It resolves claims by banks seeking to hold Target responsible for their costs to reimburse fraudulent charges and issuing new credit and debit cards because of the breach.
The Minneapolis-based company has said at least 40 million credit cards were compromised, and that as many as 110 million people may have had personal information, such as email addresses and phone numbers, stolen.
Notable data breaches:
Notable data breaches in the US recently
Target in $39.4M settlement with banks over data breach
LONDON, ENGLAND - AUGUST 19: A detail of the Ashley Madison website on August 19, 2015 in London, England. Hackers who stole customer information from the cheating site AshleyMadison.com dumped 9.7 gigabytes of data to the dark web on Tuesday fulfilling a threat to release sensitive information including account details, log-ins and credit card details, if Avid Life Media, the owner of the website didn't take Ashley Madison.com offline permanently. (Photo by Carl Court/Getty Images)
Katherine Archuleta, director of the U.S. Office of Personnel Management (OPM), speaks during a House Oversight and Government Reform Committee hearing on the OPM data breach in Washington, D.C., U.S., on Wednesday, June 24, 2015. U.S. senators said yesterday they doubt the government's personnel office understands the breadth of a computer hack that exposed the records of more than 4 million federal workers, or that the agency can stop another breach. Photographer: Andrew Harrer/Bloomberg via Getty Images
WASHINGTON, DC - JUNE 05: The entrance to the Theodore Roosevelt Federal Building that houses the Office of Personnel Management headquarters is shown June 5, 2015 in Washington, DC. U.S. investigators have said that at least four million current and former federal employees might have had their personal information stolen by Chinese hackers. (Photo by Mark Wilson/Getty Images)
SCHAUMBURG, IL - AUGUST 04: A statue of a horse stands at the entrance to a P.F. Chang's restaurant on August 4, 2014 in Schaumburg, Illinois. P.F. Chang's China Bistro Ltd. said today that the company experienced a data breach involving customers' credit and debit card information which affected 33 restaurants in 16 states, including the Schaumburg, Illinois location. (Photo by Scott Olson/Getty Images)
PORTLAND, ME - AUGUST 15: Shaws on Congress Street on Friday, July 15, 2014. Shaws parent company is investigating a possible data breach. (Photo by Logan Werlinger/Portland Press Herald via Getty Images)
COLMA, CA - APRIL 18: Customers enter a Michaels art and crafts store on April 18, 2014 in Colma, California. Michaels, the largest arts and crafts chain in the U.S., announced that an estimated 2.6 million cards used at its stores across the country may have been affected by a security breach. Aaron Brothers, a subsidiary of Michaels, was also affected by the breach. (Photo by Justin Sullivan/Getty Images)
CORAL GABLES, FL - FEBRUARY 28: A checkout keypad is seen at a Sears store on February 28, 2014 in Coral Gables, Florida. According to reports the U.S. Secret Service is investigating a possible digital attack at Sears Holdings Corp. (Photo by Joe Raedle/Getty Images)
A couple of shoppers leave a Target store on a rainy afternoon in Alhambra, California on December19, 2013, as the US retail giant said some 40 million customers may have had bank card data compromised by hackers who broke into its database as holiday shopping got underway. Target said there had been 'unauthorized access' to its payment system in US stores affecting credit and debit cards with approximately 40 million credit and debit cards possibly affected by the breach between November 27 and December 15, the company said in a statement. AFP PHOTO / Frederic J. Brown (Photo credit should read FREDERIC J. BROWN/AFP/Getty Images)
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Wednesday's settlement calls for Target to pay as much as $20.25 million directly to banks, and $19.11 million to fund a MasterCard Inc. program related to the breach.
The accord covers all banks that issued payment cards put at risk by the breach, and which did not previously release their claims against Target.
Molly Snyder, a Target spokeswoman, said the retailer is "pleased that the process is continuing to move forward."
In afternoon trading, Target shares were down 30 cents at $72.51 on the New York Stock Exchange.
The case is In re: Target Corporation Customer Data Security Breach Litigation, U.S. District Court, District of Minnesota, No. 14-md-02522.