Retailers and consumer advocates say fees charged by credit card companies are eating into shoppers’ budgets, but payment processors argue those fees are competitive and necessary.
Key Facts:
• Retailers pay swipe fees averaging a bit over 2%, and as high as 4% for premium rewards cards.
• These costs total more than $170 billion a year, rising from $20 billion in 2001.
• Debit fees for major banks are capped by the Federal Reserve at 21 cents plus a small extra amount per transaction.
• Some experts say households pay roughly $1,100 yearly because of these fees, as costs get passed on to shoppers.
The Rest of The Story:
Every time a customer pays with a credit card, the retailer is charged an interchange fee from banks and card networks.
That might sound small, but industry observers say these charges pile up quickly for businesses, and that many pass part or all of that cost on to their customers.
As the total amount of credit card usage increases, so do the fees.
The National Retail Federation believes that Visa and Mastercard dominate the credit card market, holding an estimated 80% combined share.
Critics say this dominance limits competition and can lead to higher fees.
In contrast, the Electronic Payments Coalition says credit card processing costs have stayed relatively stable, and are even lower than handling cash, which has its own challenges.
Still, some lawmakers and consumer groups want action, believing the fees hurt small businesses most.
They note that large retailers have more bargaining power to manage cost structures, while smaller stores may not.
The proposed Credit Card Competition Act, which has been floated in Congress, would require large banks to offer an additional competing network option, potentially reducing costs.
“Every year, 3% of all of our sales is washed away just to credit card processing,” restaurant owner Gene-Christian Baca says.
#CreditCardCompetitionAct #swipefees @doug_Kantor @NACSonline @TODAYshow @NBCNews @SenatorDurbin @WaltersHotDogs @RogerMarshallMDhttps://t.co/48L4xYuW0x
— Merchants Payments Coalition (@MerchantsPymnts) January 7, 2025
The Bottom Line:
Credit card swipe fees are a major flashpoint between retailers, financial institutions, and lawmakers.
Some say they protect banks and consumers with essential services like fraud prevention and payment security.
Others argue they burden shoppers by driving up prices.
READ NEXT: After Dem Senator Declares ‘Fight is Just Beginning’ Trump Team Fires Back
Whether Congress takes up new reforms could determine if these costs remain or start to shrink in the future.
