Senator Delivers Powerful Speech on Swipe Fees

Durbin told the Senate that the fees are anticompetitive and are a cost to Americans.

May 06, 2022

Senator Dick Durbin

WASHINGTON—In a speech on the Senate floor, U.S. Senate Majority Whip Dick Durbin highlighted solutions Congress can implement to help American families save money, including reining in the excessive swipe fees charged by Visa and Mastercard, according to a news release.

During Wednesday’s Senate Judiciary Committee hearing, Durbin questioned witnesses from Visa and Mastercard about rising swipe fees that lead to higher consumer prices for goods and services and add to inflationary pressures. It was the first hearing the committee has held on the topic in 16 years.

Durbin said, “Visa and Mastercard control about 80% of the credit and debit card market, and every time a card with a Visa or Mastercard logo is swiped, Visa and Mastercard charge fees that take a cut out of the transaction amount. For merchants operating on tight profit margins—and that’s most merchants—these fees can add up to a big problem.”

Durbin explained the fee Visa and Mastercard require card-accepting merchants to pay the card-issuing bank is called an interchange fee, or swipe fee. It’s usually charged as a percentage of the transaction, plus a flat fee—for example, 2% plus 10 cents per transaction.

During Wednesday’s hearing, the CEO of Giant Eagle, a regional grocery store chain based in Pittsburgh, explained that these swipe fees can exceed their entire profit margin of 1%.

Durbin continued, “[Merchants] have to raise their prices to cover the high swipe fees required by Visa and Mastercard, and customers end up holding the bag. Swipe fees aren’t just annoying to the retailers—they are anticompetitive … the banks let Visa and Mastercard price-fix the fees for them. When fee rates go up, banks make more money every time people use debit or credit cards. That benefits Visa and Mastercard, who take their own cut—called a network fee—out of each swipe. They have an incentive to keep raising fees.”

To address this issue, Durbin highlighted various solutions, such as making it clear to consumers on their monthly statement how much was deducted in swipe fees on each transaction, preventing Visa and Mastercard from hiking swipe fees up to an unreasonable level and promoting competition by giving merchants more competitive options on each swipe.

Durbin concluded, “The bottom line is this: If we’re serious about reducing costs for American families, get serious about reining in swipe fees. Visa and Mastercard swipe fees are adding to the fires of inflation every day. Is that what we want in our economy? Is that what American families need at this moment in history? I think not.”

NACS’ General Counsel Doug Kantor testified at Wednesday’s Senate Judiciary Committee on behalf of the convenience store industry and the Merchants Payments Coalition, of which NACS is an executive committee member.

In his opening statement, Kantor described the antitrust issues borne from Visa and Mastercard’s dominance of the credit card market. “This is an incredibly concentrated market, and none of [the banks] are setting their own prices. That doesn’t make any sense,” stated Kantor. “On top of that, Visa and Mastercard set the terms by which cards are accepted, which make sure to insulate those fees from any other competitive market pressure to make sure they can stay high.”

Durbin, Sen. Roger Marshall, (R-KS), Rep. Peter Welch, (D-VT) and Rep. Beth Van Duyne, (R-TX) wrote to Visa and Mastercard last month asking the card companies to withdraw the rate hike. The lawmakers said the increase would add to inflationary pressure and is the “last thing American families deserve right now.”

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. 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.