Credit Card Competition Will Reduce Swipe Fees

In an op-ed, Sen. Roger Marshall explains how Wall Street banks benefit from swipe fees, while merchants pay the price.

August 08, 2022

ALEXANDRIA, Va.—Credit card swipe fees were up 25.6% in 2021 ($13.5 billion) versus 2020 ($10.7 billion) for convenience retailers, while swipe fees soared 25% last year to a record $137.8 billion for all merchants, according to the Merchants Payments Coalition, of which NACS is an executive committee member. In response, Kansas Sen. Roger Marshall wrote an op-ed in the Kansas City Star and Wichita Eagle on how swipe fees are hurting merchants and how there should be increased competition among credit cards and the banks that issue the cards.

“Two credit card companies and four woke Wall Street banks dominate and control the nearly $5 trillion annual credit card business,” Sen. Marshall wrote. “Every swipe comes with it a fee, an ever-increasing fee, invisible to most, but increasingly crushing our merchants and rising costs for consumers across the board. Just like a sales tax, Wall Street banks levy a 2-4% fee on every purchase you make with your credit card, and the retailer has to absorb or pass on this cost to consumers.”

Sen. Marshall writes that the credit card industry benefits from inflation, as Visa’s profits are up 32% from last year, showing a profit of $3.4 billion in the most recent quarter, while MasterCard showed a profit of $2.3 billion for the most recent quarter. Additionally, when combined, Visa and Mastercard dominate 84% of the market—“a clear duopoly,” Sen. Marshall wrote.

"For many of the Kansas merchants I have spoken with, their monthly swipe fees are their second-highest business expense after labor, and of course those costs trickle down to the consumer in the form of higher prices. It’s these same local merchants, who are being squeezed by more than 11% wholesale inflation, who have asked our office to fight for Main Street against Wall Street—to fight for the hardworking Kansans who are most impacted by inflation,” he wrote.

Sen. Marshall partnered with Illinois Sen. Dick Durbin to introduce the Credit Card Competition Act in late July, which would require the largest U.S. banks that issue Visa or Mastercard credit cards to allow transactions to be processed over at least two unaffiliated card payment networks—the same process that has been used for debit card transactions for more than a decade.  

The Credit Card Competition Act would require that there be two competing networks enabled on a credit card. It would no longer be just Visa or just Mastercard—there would have to be a smaller, competing network enabled on the card as well. The global card brands would have no choice but to compete for a retailer’s business, similar to what happens on debit today. Retailers would then be able to make the most cost-efficient choice for their business—and it would save American consumers and businesses an estimated $11 billion per year.

“Our bill would create a normal, healthy competitive market where both sides have the ability to compete,” wrote Sen. Marshall.

NACS is asking its members to contact their senators and ask them to co-sponsor the Credit Card Competition Act, S. 4674, using the NACS Grassroots Portal. Congress must act to ensure that there is price competition on swipe fees and enable the U.S. to have an innovative and efficient credit card market.

If your senator is Sens. Marshall or Durbin, our system will automatically create a note of thanks to them for introducing this critical legislation.