Merchants Welcome Reintroduced Swipe Fee Legislation

Credit and debit card swipe fees have doubled over the past decade.

June 09, 2023

WASHINGTON—The Merchants Payments Coalition (MPC) has welcomed the reintroduction of the Credit Card Competition Act, saying the measure would provide relief from billions of dollars in rapidly rising swipe fees that drive up prices for consumers.

“Lawmakers laid the groundwork last year and we look forward to them passing this bipartisan, pro-Main Street legislation this year,” said Doug Kantor, NACS general counsel and MPC executive committee member. “Swipe fees that drive up costs for small merchants and prices for American families are already the highest in the industrialized world and are going nowhere but up. Lack of competition is the problem, and the sooner the card industry can be made to compete the better. As policymakers work to reduce inflation, this carefully crafted bill will lead to lower fees and better security while helping merchants hold down prices.”

The measure is being sponsored by Senators Richard Durbin, D-Ill., Roger Marshall, R-Kan., Peter Welch, D-Vt. and J.D. Vance, R-Ohio and by Representatives Lance Gooden, R-Texas, Zoe Lofgren, D-Calif., Thomas Tiffany, R-Wisc. and Jefferson Van Drew, R-N.J.

“Small businesses are calling out the loudest for swipe fee reform because we are hit the hardest by these fees,” said Mike Beal, chief financial officer of Kansas City, Kansas, family-owned grocer Balls Foods, who recently spoke at a Capitol Hill news conference. “Small businesses pay the highest swipe fee rates, we don’t have the resources to navigate complex credit card contracts, and we have absolutely no leverage to negotiate as these fees rise higher every year. Small businesses need swipe fee reform, and we need it now.”

Durbin and Marshall first unveiled the measure last July, and an identical companion bill was introduced in the House in September by Gooden and Welch before Welch was elected to the Senate. The 2021-2022 session of Congress ended before the bills could see a vote, but action is expected in the current session.

The Credit Card Competition Act would address swipe fees, which average over 2% of the transactions that banks and card networks, like Visa and Mastercard, charge merchants to process credit card transactions. Credit and debit card swipe fees have doubled over the past decade—soaring by $22 billion in 2022 alone to a record $160.7 billion—and are most merchants’ highest operating cost after labor, driving up consumer prices by an estimated $1,024 a year for the average family. As a percentage of the transaction, credit card swipe fees automatically go up as prices rise, creating a multiplier effect on inflation.

The measure seeks to lower swipe fees by ending Visa and Mastercard’s monopoly over how transactions on credit cards banks issue under their brands are routed for processing. Under current practice, Visa and Mastercard centrally price-fix the fees and restrict routing transactions to their own networks. But the bill would require that cards from banks with $100 billion or more in assets be enabled to be processed over at least two unaffiliated networks—Visa or Mastercard plus a competitor like NYCE, Star, Shazam or American Express or Discover.

Banks would decide which networks to enable, but merchants would then choose which to use on individual transactions, meaning networks would have to compete over fees, security and service, saving merchants and their customers an estimated $11 billion a year. Consumers would still use the same Visa and Mastercard cards they now use, rewards would not be affected, and community banks and small credit unions would be exempt.

In addition to lowering fees, the bill would improve security. Independent networks

have less fraud than Visa and Mastercard’s networks, according to the Federal Reserve, and the bill would bar networks controlled by foreign governments, like China’s UnionPay, from American credit cards. Any bank could put China UnionPay on its credit cards right now with no legal restrictions, but the bill would close that loophole.

NACS announced its support for bipartisan legislation earlier this week.

“Our stores compete every day for consumers’ business—as does every other business in the country. In the broken credit card market, no competition means an open invitation for these large multinational corporations to continually increase rates and to only focus on what benefits them, as opposed to the customer,” said NACS President and CEO Henry Armour.

Armour added that credit card swipe fees for the convenience retailing industry have increased a staggering 82% between 2020 and 2022 and now stand at $19.5 billion.

NACS members are encouraged to reach out to their members of Congress and ask that they support the Credit Card Competition Act. NACS makes it easy for retailers and suppliers to send a message to their legislators via the NACS Grassroots Portal.