Inflation has eased since its peak in 2022, but retailers say credit card processing fees aren't helping to lower inflation.
The National Retail Federation sent a letter to the Senate Judiciary Committee this week urging Congress to take action to limit credit card transaction fees.
What is a swipe fee?
Businesses are charged a fee for each transaction made using a credit card. parliamentary reportsuggests that credit card companies collected $160 billion in swipe fees in 2022.
According to the report, credit card companies typically take about 2% of transactions.
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One reason for this is that far more transactions are performed using credit cards. In 2015, there were 33.7 billion credit card transactions, with sales reaching $3.5 trillion. By 2021, that number had increased to 51.1 billion transactions with a total value of $4.88 trillion.
Another reason swipe fees are on the rise is that credit card companies are competing to offer perks like air miles, gift cards, and cash back to their customers. While credit card companies earn other forms of revenue from customers with balances, such as late fees and interest, transaction swipe fees allow businesses to compensate customers who don't carry a balance while taking advantage of cashback offers. It's a method.
What the retail industry wants
Visa and Mastercard control approximately 80% of the credit card market. The National Retail Federation is calling for more competition.
“The current credit card system maximizes profits for the network and the nation's largest credit card issuers while forcing merchants and their customers to pay excessive fees without any means to contain these costs. “It's purpose-built by the duopoly of Visa and Mastercard,” said David French, NRF's senior vice president of government relations. “This market failure requires Congressional action.”
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French added that swipe fees are “adding inflationary pressures to the U.S. economy and hindering business growth for retailers and other retailers.”
Among the lawmakers who introduced the Credit Card Competition Act was a bipartisan group of senators, including Vice President-elect J.D. Vance. The bill would “direct the Federal Reserve to provide at least two network options on which large credit card issuing banks can process electronic credit transactions.”
Senator Peter Welch said, “Currency fees place a tremendous burden on our nation's small businesses, but due to Visa and Mastercard's duopoly in the credit card network market, Main Street businesses are unable to afford these overwhelming fees. “If we don't pay the fees, we have no choice but to risk bankruptcy.” , D-Vermont. “The Credit Card Competition Act will restore choice and competition in the credit card network market, help lower costs for small businesses, and make it easier for these important businesses to thrive.”
Credit card industry CEOs were invited to a hearing earlier this year to testify on the Credit Card Competition Act, but they did not accept the invitation.
