What You Need to Know About Swipe Fees

Convenience retailers have been grappling with high credit card swipe fees for two decades.

November 03, 2022

By Sara Counihan

ALEXANDRIA, Va.—Convenience store swipe fees were $14 billion in 2021, a 26% increase over the year prior and were about 33% higher than that over the first half of 2022, according to the NACS State of the Industry Report® of 2021 Data. Credit card swipe fees represent our industry’s second-highest operating cost—less than labor but more than rent or utilities.

“The big problem with swipe fees is that Visa and MasterCard set the amount of the swipe fees, but it’s not the fee they charge, it’s the fee all those banks that give consumers their cards charge,” said Doug Kantor, NACS general counsel, on this week’s episode of Convenience Matters. “They don’t compete on price, and what happens is these fees get higher and higher and higher.”

The convenience store industry has been grappling with high swipe fees for two decades, and within that timeframe, competition with debit card transactions has been created, thanks to the Durbin Amendment, which requires debit-card transactions to be processed over at least two unaffiliated card payment networks. Now, Congress is looking to address the same with credit card swipe fees via the Credit Card Competition Act.

“Having some competitive market pricing could make a world of difference here,” said Kantor.

In July, Majority Whip Dick Durbin (D-IL) and Senator Roger Marshall (R-KS) introduced the legislation in the Senate, and Marshall has said that swipe fees are an inflation multiplier. What he means is that the swipe fees set by Visa and Mastercard are not just a set fee, such as 20 cents for every transaction. It’s 20 cents a transaction plus a percentage of the total transaction amount, which is 2.25% on average.

“That 2%, the minute there’s a penny of inflation, that 2% means the swipe fee is higher too. And so, our members or other retailers have to increase their prices to cover their increased cost of goods, and then they get hit with an increased swipe fee because it’s a percentage of the increased price, so they have to increase prices again to make up the swipe fee,” said Kantor.

“Then they get a higher swipe fee and have to keep doing it. It’s this multiplying effect like a dog chasing its tail that just means more and more and more inflation automatically without necessarily any changes happening to the bank’s costs,” he said.

Listen to “Competition for the Credit Card Market” to find out how credit cards have been able to get away with swipe fees for decades and what NACS is doing to fight these astronomical costs for convenience stores.

NACS is asking its members to contact their Members of Congress and ask them to co-sponsor the Credit Card Competition Act, S. 4674 and H.R. 8874, 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.

Sara Counihan is contributing editor of NACS Magazine and NACS Daily. She can be reached at scounihan@convenience.org.