Almost 2,000 companies and 300 U.S. trade associations are calling on Congress to slash credit card swipe fees, which they say are stifling retailers and bogging down consumers in untenable debt.
In an open letter sent last week, trade groups like the National Retail Federation, the Merchants Payments Coalition and the National Small Business Association again threw their weight behind the bipartisan and bicameral Credit Card Competition Act, sponsored by Senators Richard Durbin (D-Ill.) and Roger Marshall (R-Kan.) and Representatives Lance Gooden (R-Tex.) and Zoe Lofgren (D-Ca.).
Related Stories
The proposed legislation aims to wrest control away from credit card conglomerates Visa and Mastercard by giving merchants another choice for credit-card processing. A competing network like American Express or Discover, or one of a few independent networks like Star, NYCE or Shazam, would be added to the mix. While banks would be able to choose which networks to enable, merchants would be able to select which to use. This would drum up competition between networks, forcing them to compete over fees, security and service. Financial institutions with less than $100 billion in assets would be exempt, including all community banks and all but one credit union.
The change could save merchants and shoppers up to $15 billion per year, according to independent payments consultancy CMSPI. Swipe fees usually hover between 2 and 3 percent, but can reach up to 4 percent for some premium rewards cards. “While this legislation would benefit all merchants, it is small retailers who are calling for swipe fee reform more than any segment of our industry,” the letter said. “Small retailers have the narrowest profit margins and fewest resources and are hit the hardest by continuing unjustified increases in swipe fees.”
Merchants, including hundreds of small businesses, sent their own separate letter to lawmakers, saying that reform is needed to keep Visa and Mastercard from monopolizing the market and having too much control over swipe fee rates. “Today, Visa and Mastercard control over 83 percent of the U.S. credit card market,” the signatories wrote. “They do not have to compete with any other service provider for merchant business.”
“In fact, they bar their competitors from even having a shot at business with banks that issue their cards,” they added. “This blocking of competition drives up prices for merchants and consumers, harms security and strangles innovation.” Swipe fee revenue has increased by 50 percent since the pandemic, reaching a record-setting $160.7 billion in 2023.
Consumers have been relying heavily on credit cards over the past two years, with inflation hitting all-time highs and its effects lingering longer than many experts anticipated. “And because credit card swipe fees are a percentage of the transaction, they are an inflation multiplier,” letter writers said, noting that average U.S. families incurred more than $1,000 in debt last year due to fees alone.
The debt shoppers have incurred appears to be sticking around; 56 percent of U.S. credit card users reported that they have carried debt for at least one year. The Federal Reserve Bank of New York’s Center for Microeconomic Data reported that household debt hit $17.29 trillion during the third quarter of 2023, with credit card debt accounting for $1.08 trillion, and consumer financial services firm Bankrate revealed that 49 percent of credit card users carry debt month to month, a jump of 46 percent since 2023.
Shoppers aren’t secure in the notion that they’ll be able to manage the debt moving forward. Credit card confidence tumbled to its lowest level since 2018 in December, according to lending marketplace LendingTree. Only 51 percent of surveyed cardholders indicated that they were certain they could pay their statement balances in full during the last month of the year—a 7-percent decline from the previous month.
