Credit Card Competition Act Takes Swipe At Swipe Fees

’Tis the season for holiday spending, but – with inflation up 8.2 percent over last year – gift-giving could put a more significant dent in consumers’ wallets. Deloitte predicts retail sales will not keep pace with inflation, but whether they’re shopping online or ringing up in-store, shoppers will be more likely to offset rising purchase prices by leaning on their credit cards.

However, consumers might be shocked to find out that the swipe fees associated with using that credit card also play a role in soaring product prices.

Swipe fees are the 2 to 3 percent merchants are charged by credit card companies every time customers swipe their cards to make purchases. In fact, swipe fees constitute most retailers’ second-highest overhead expense, with total card fees imposed on merchants in 2021 totaling almost $138 billion – more than double the fees collected in 2010.

This leaves grocers, restaurateurs, retailers and others no choice but to have consumers foot the bill for the extra expense, costing the average American family an extra $900 a year.

Though 2 to 3 percent of each transaction might not sound like much, the U.S. swipe fee rate is the highest in the industrialized world. But while the impact of swipe fees applies to millions of consumers and thousands of businesses, two entities are primarily responsible for setting them: Visa and Mastercard.

These two giants of industry make up more than 80 percent of the credit card market, effectively putting them in charge of setting the swipe fees for the thousands of banks that issue their cards.

Thankfully, Congress can help provide swipe fee relief for consumers and businesses alike – and restore the joy of holiday shopping this year – by passing the Credit Card Competition Act.

This bipartisan, bicameral bill was first introduced in the U.S. Senate by Sens. Roger Marshall (R-Kansas) and Dick Durbin (D-Illinois) and later in the U.S. House by Reps. Lance Gooden (R-Texas) and Peter Welch (D-Vermont).

It would finally break up the Visa-Mastercard duopoly by requiring that banks with over $100 billion in assets – which applies to fewer than 30 institutions – give credit card competitors other than Visa or Mastercard a shot at processing transactions.

Competition – a driving factor in every other domestic commercial industry – is central to the American economy. Why shouldn’t it apply to the credit card market? We all stand to benefit from the lower prices and industry innovation competition this inherently spurs.

It’s time to give networks like Star, Shazam, Pulse and NYCE, in addition to American Express and Discover, a healthy opportunity to improve our credit card market.

Lower prices are at the top of everyone’s wish list this holiday season. Given his unique position in Congress, Senate Majority Leader Chuck Schumer (D-NY) can deliver meaningful economic relief for everyone – from families to family-owned businesses – by passing the Credit Card Competition Act before the end of this year.