The bipartisan bill in Congress aims to reduce swipe fees, also known as interchange fees, that retailers pay every time a customer uses their card to make a purchase. The effort has the support of retail giants including Wal-Mart (WMT), Target (TGT) and Kroger (KR), as well as convenience stores and independent grocers.
“Credit card swipe fees in the U.S. are higher than anywhere else in the industrialized world – more than seven times higher than in Europe,” a coalition of businesses wrote in a letter to lawmakers last week. “They are inflationary multipliers.”
A customer shops at a Dollar General store in Vallejo, California, on March 17, 2022. Dollar General announced fourth-quarter earnings of $2.57 per share, slightly above analysts’ estimates of $2.56 per share. The retailer reported net income of $597.4 million, down from $642.7 million a year ago.
Dollar General’s newest shoppers: those earning $100,000 a year
Interchange fees are charged through a complex system that varies by merchant, transaction size, type of card used and banking institution, among other factors. Last year, merchants paid about $138 billion in fees, according to Nielsen, a publication covering the payments industry.
These fees typically represent 1 to 3 percent of the final price of a transaction, and stores often pass them on to customers at a higher price.
Visa (V) and Mastercard (MA) account for more than 80 percent of the credit card market in the U.S. In July, U.S. Senators Dick Durbin of Illinois and Roger Marshall of Kansas introduced legislation that would allow businesses to route many payments to an alternative network not operated by Visa (V) or Mastercard (MA). alternative networks. This week, U.S. Representatives Peter Welch of Vermont and Lance Gooden of Texas introduced similar measures.
Supporters of the bills say they would spark more competition in the credit card network market and break the grip Visa and MasterCard have on the industry.
“Credit card swipe fees drive up the price consumers pay for groceries and gasoline,” Durbin said in July. “Bringing real competition to credit card networks will help lower swipe fees and reduce costs for Main Street merchants and their customers.”
Visa and Mastercard said the fees help fund rewards programs and banking services and help reduce merchant risk by guaranteeing payments regardless of fraud or whether customers pay their credit card bills.
Credit card companies say the legislation will not lower prices for consumers, but instead will lead to unintended consequences such as fewer rewards, less access to credit and data security risks.
Jeff Tassey, president of the Electronic Payments Coalition, which represents card issuers and networks, said, “This legislation will once again raise the bottom line for retailers at the expense of average Americans – taking away their credit card rewards and usurping their choice of networks. ”
In addition, there are concerns that credit cards could become more expensive and harder for some consumers to obtain.
Deshundra Jefferson, spokeswoman for the Credit Union National Association, said some credit unions that serve underserved communities are concerned that the legislation could limit customers’ access to credit.
