Swipe Fee Legislation Reintroduced to Spur Competition, Tame Rising Fees

Credit Card Competition Act of 2023 has bipartisan support
credit card transaction fees
Photograph: Shutterstock

The bipartisan Credit Card Competition Act of 2023, designed to provide merchants relief from swipe fees, was reintroduced today in Congress and has the support of the Merchants Payment Coalition, NACS, the National Retail Federation and other business groups.

The act might have more momentum this year, due in part to inflation. As prices rise, credit card swipe fees charged as a percentage of transactions also go up, creating a multiplier effect on inflation, the Merchants Payment Coalition said.

“We look forward to them passing this bipartisan, pro-Main Street legislation this year,” said Doug Kantor, an executive committee member at Merchants Payment Coalition and general counsel for the National Association of Convenience Stores. “The sooner the credit-card industry can be made to compete the better,” he said in a statement.

Credit and debit card swipe fees increased $22 billion in 2022 to a record $160.7 billion, the coalition said, noting they are most merchants’ highest operating cost after labor.

“It’s time for big banks and global card networks to compete the same as small businesses do every day,” said Stephanie Martz, the National Retail Federation’s chief administrative officer and general counsel, in a statement.

“Skyrocketing swipe fees have been driving up prices for consumers for far too long, and we are confident this is the year Congress is going to say it’s time for that to stop. Competition will bring these fees under control and strengthen security at the same time,” Martz said.

The act aims to reduce excessive swipe fees by breaking the monopoly Visa and Mastercard have held and requiring large credit-card issuers to allow two credit-card networks to process payments. One of the networks must be different from Visa or Mastercard’s networks, but could include the networks of American Express and Discover, according to a summary of the bill provided by the office of Sen. Dick Durbin (D-Illinois).

Durbin was a sponsor with Sen. Roger Marshall (R-Kansas), of the original act introduced in July. The act wasn’t passed before the 2021-22 session ended. Reps. Lance Gooden (R-Texas) and Zoe Lofgren (D-California), introduced a companion House bill in September. Durbin, Marshall, Gooden and Peter Welch (D-Vermont) are co-sponsors of the 2023 act, along with Sen. J.D. Vance (R-Ohio) and Reps. Lofgren, Thomas Tiffany (R-Wisconsin) and Jefferson Van Drew (R-New Jersey).

The issue centers on the way Visa and Mastercard restrict competition, the National Retail Federation said. They control 80% of the U.S. credit card market and allow transactions made using their cards be processed only over their own networks. The act would change this by requiring Mastercard and Visa cards issued by large banks with assets over $100 billion also be processed by a second network, such as Star, NYCE or Shazam, providing merchants a choice of networks. This is expected to lower swipe fees and provide competition in security and service the networks offer.

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