Legislators Urge Visa, Mastercard to Cancel Swipe-Fee Increases

A bipartisan letter to the credit card companies said that the fees hurt consumers; swipe fees were up over 25.6% in c-stores last year.

April 18, 2022

Lady using a credit card to pay

ALEXANDRIA, Va.—A group of U.S. lawmakers sent a bipartisan letter to Visa and Mastercard urging them to halt their planned credit card swipe fee increases set to take effect this month, reports the Wall Street Journal.

Higher costs are “the last thing American families deserve right now,” states the letter signed by Sen. Dick Durbin, (D-Illinois), Sen. Roger Marshall (R-Kansas); Rep. Peter Welch (D-Vermont) and Rep. Beth Van Duyne (R-Texas).

“As Americans are dealing with the highest rate of inflation in decades, your profits are already high enough and any further fee increase is simply taking advantage of vulnerable Americans,” the letter states. “Raising your interchange fee rates even higher will undoubtedly increase the already high costs consumers are facing and add to inflationary pressure, which is the last thing American families deserve right now.”

The Merchants Payments Coalition (MPC) welcomed the letter, agreeing that the increases would drive up prices paid by consumers already facing high inflation. NACS is a founding member of the MPC.

“It’s very significant that lawmakers from both parties and both chambers of Congress have come together to stand up against the global card giants to protect small businesses and consumers,” said Anna Ready Blom, a member of the MPC executive committee and NACS director of government relations. “This shows that this is an issue that crosses political lines. This is about the card industry continuing to profit on the backs of Main Street merchants and hard-working American families at a time when they can least afford it.”

The letter said that Visa and Mastercard could “play a constructive role” in reducing inflation by reducing swipe fees. Because swipe fees are a percentage of each transaction, the amount collected by credit card companies rises with inflation. At current rates, card networks and banks stand to see nearly 9% more swipe fee revenue this year even if rates stay the same, says the MPC.

Visa and Mastercard have said that swipe fees help the companies cover costs related to innovation and preventing fraud, reports the Journal.

“Electronic payments play a critical role every day and have proven even more valuable since the start of the pandemic,” a Mastercard spokesman told the Journal. “And that’s why we’re seeing merchants encouraging their customers to use electronic forms of payment due to the significant value that they receive in return—a safe, convenient experience and a guaranteed payment.”

Visa and Mastercard last year postponed an estimated $1.2 billion in swipe fee increases that were set to take effect in April 2021 after Durbin and Welch said they were ill-timed as the economy was struggling to recover from the pandemic. The card networks said the increases would take effect this month instead.

The letter noted that Visa, Mastercard and their banks charged merchants a total of $77.5 billion in credit card processing fees and $28.1 billion in debit card fees in 2021, according to a Nilson Report. Those numbers were part of $137.8 billion in processing fees when all types and brands of cards are included, a total that more than doubled over the previous decade.

Credit card swipe fees remain one of the highest operating costs for convenience store retailers after labor, according to NACS State of the Industry data. Consumer preferences for more touch-free transactions and the coin circulation challenge in summer 2020 led to record debit and credit card usage at convenience stores. In 2021, overall card fees paid by the convenience store industry were $13.5 billion, up 25.6% in 2021 versus 2020 ($10.7 billion), NACS SOI data indicate.

The letter said Visa and Mastercard often announce decreases in some swipe fees only to raise others, resulting in a net increase, but that “merchants and American consumers are not fooled by such bait-and-switch tactics.” It said favorable rates that are contingent on using the networks’ proprietary security technology “may raise antitrust concerns” and “warrant close scrutiny.”

At an average of 2.22% of the transaction amount, Visa and Mastercard’s U.S. credit card swipe fees are the highest in the industrialized world. Swipe fees are most merchants’ highest operating cost after labor and drive up consumer prices, amounting to more than $700 a year for the average American family.