Credit Card Swipe Fees; Is Congress Ready to Act?

Bottom Line // November-December 2023

There is likely no issue currently that Americans have more interest and concern in than inflation. The steepest rise in 30 years in pricing, in particular in consumer staples like food and gasoline, is eating away at the purchasing power of the average citizen. Adding to the increased costs to consumers are credit card swipe fees that have increased dramatically in the last few years. As these fees are a percentage based on the cost of purchase, these fees rise dramatically during inflationary times.

MIRA members and retailers nationwide have had to either absorb or pass on credit card swipe fees to customers that have grown 82% in value since 2020. According to a survey and study by the National Association of Convenience Stores (NACS), swipe fees are now the second largest operating cost behind labor for a vast number of retailers. The COVID-19 pandemic only accelerated credit card usage among the purchasing public as remote purchases become much more the norm, if we can use that term during a global crisis.

Currently, Visa and Mastercard make up 83% of the volume of card transactions in the United States. As such, this near monopoly allows these two networks to set terms for the banks and other entities that issue their cards. Absent competition, these swipe fees have continued to climb. The average fee paid on transactions in the U.S. is 2.25% of the purchase amount. These fees now account for $19.5 billion and cost the average American family about $1,000 annually. According to the NACS, this average rate is more than 7 times what business owners and customers pay in Europe and 5 times what they pay in China. This unfair control of the credit card market has caught Congress’ attention and legislation has been introduced in an attempt to address these rapidly increasing costs put on the small American business and consumer.

The Credit Card Competition Act was introduced this summer by Senators Roger Marshall (R-Kansas) and Dick Durbin (D-Illinois), and Congressmen Peter Welch (D-Vermont) and JD Vance (R-Ohio), a bi-partisan group of House and Senate members. The bills as introduced would require the largest U.S. banks that issue Visa or Mastercard credit cards allow transactions to be processed over at least two unaffiliated card payment networks. This is the same process that has been in use for debit card transactions for more than a decade. The legislation would apply only to banks with more than $100 billion in assets. This figure would exempt most banks and credit unions. 

The legislation would also propose a marketplace by which retailers could choose a payment network to handle its transactions. This would bring more competition to the market and help drive down the price of card fees to perhaps match those that retailers and consumers enjoy in other parts of the world. These bills may also help combat fraud. According to the Federal Reserve, most competing networks shut out by Visa and Mastercard not only charge lower fees, but have lower rates of fraud. 

MIRA, in conjunction with NACS, is continuing to monitor this proposed legislation and will update members as to when action is proposed. We would urge members to contact their Congressional representatives to support the Credit Card Competition Act and help ease the burden these ever-increasing fees have placed on small business owners and their customers. Force the credit card processing industry to stop blocking competition in the market. During these high inflationary times, we would all welcome a little relief.