Merchants Call Credit Card 'Swipe' Fees Biggest Bank Scam

Contact: J. Craig Shearman
(202) 257-3678

WASHINGTON, February 1, 2024 – Credit and debit card “swipe” fees are among the issues Congress should examine as lawmakers look into banking scams, the Merchants Payments Coalition said today.

“There are many banking scams, but swipe fees are the biggest scam of all,” MPC Executive Committee member and National Association of Convenience Stores Senior Vice President of Government Relations Lyle Beckwith said. “Everyone pays higher prices because of swipe fees regardless of whether they use a credit card or not, but they don’t even know it. Taking $1,000 from every American family each year without them knowing it is a huge hidden scam.”

MPC’s remarks come as the Senate Banking, Housing and Urban Affairs Committee holds a hearing today on “scams and fraud in the banking system and their impact on consumers.” Witnesses include experts from the National Consumer Law Center, the National Consumers League and a representative of the American Bankers Association.

Credit and debit card swipe fees have risen 50 percent since the pandemic and hit a record $160.7 billion in 2022. The fees are most merchants’ highest operating cost after labor and drive up prices for the average family by over $1,000 a year. The combination of swipe fees and card rewards “transfer income from less to more educated, from poorer to richer and from high to low-minority areas,” according to the Federal Reserve.

The fees have risen rapidly because of lack of competition: Visa and Mastercard, which control over 80 percent of the market, each centrally set the swipe fee rates charged by all banks that issue credit cards under their brands and also block transactions from being processed over competing networks that offer lower fees and better security.

The fees would be addressed by the Credit Card Competition Act, which is currently awaiting a vote in the Senate. The bill would address that by requiring that credit cards from the nation’s largest banks be able to be routed over at least one competing network like NYCE, Star or Shazam in addition to Visa or Mastercard. According to the Fed, those networks have one-eighth the fraud rate of Visa and Mastercard.

Under the legislation, banks would select which networks to enable but merchants would then choose which to use, meaning networks would have to compete over fees, security and service, saving merchants and their customers an estimated $15 billion a year. Financial institutions with less than $100 billion in assets – including all community banks and all but one credit union – would be exempt.

About MPC
The Merchants Payments Coalition represents retailers, supermarkets, convenience stores, gasoline stations, online merchants and others fighting for a more competitive and transparent card system that is fair to consumers and merchants. Follow MPC on Twitter, Facebook or LinkedIn for the latest on swipe fees.