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Bipartisan Letter Stands Against Swipe Fee Increases

At current rates, card networks and banks stand to see nearly 9% more swipe fee revenue this year even if rates stay the same.

By Erin Del Conte | April 18, 2022

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With credit card swipe fee increases set to begin this month, bipartisan members of the House and Senate sent a letter asking Visa and Mastercard to withdraw the increases, noting it would escalate the prices paid by consumers, who are already plagued by high inflation, according to The Merchants Payments Coalition (MPC).

“It’s very significant that lawmakers from both parties and both chambers of Congress have come together to stand up against the global card giants to protect small businesses and consumers,” said Anna Ready Blom, a member of the MPC Executive Committee and director of government relations at the National Association of Convenience Stores. “This shows that this is an issue that crosses political lines. This is about the card industry continuing to profit on the backs of Main Street merchants and hard-working American families at a time when they can least afford it.”

“Inflation is handing big banks and card networks an unearned windfall because their fees go up as prices go up,” Blom said. “On top of that, they are trying to impose additional anticompetitive rules and practices that will allow them to continue their domination of the payments market while shutting out innovators who would bring transparency and competition. Small businesses want the card industry to compete the same as they do, and it’s good to see that members of Congress from both parties agree.”

Senators Richard Durbin, D-Ill., and Roger Marshall, R-Kan., and Representatives Peter Welch, D-Vt., and Beth Van Duyne, R-Texas, today sent a letter to Visa Chairman and CEO Alfred Kelly Jr. and Mastercard CEO Michael Miebach asking them to withdraw plans to increase swipe fees this month.

“As Americans are dealing with the highest rate of inflation in decades, your profits are already high enough and any further fee increase is simply taking advantage of vulnerable Americans,” the letter said. “Raising your interchange fee rates even higher will undoubtedly increase the already high costs consumers are facing and add to inflationary pressure, which is the last thing American families deserve right now.”

“Visa and Mastercard could actually play a constructive role in reducing inflation by cutting your interchange fee rates,” the letter said. The fees are a percentage of each transaction, meaning the amount collected goes up as prices rise with inflation. At current rates, card networks and banks stand to see nearly 9% more swipe fee revenue this year even if rates stay the same.

Visa and Mastercard last year postponed an estimated $1.2 billion in swipe fee increases that were set to take effect in April 2021 after Durbin and Welch said they were ill-timed as the economy was struggling to recover from the pandemic. The card networks said the increases would take effect this month instead.

Even without the increases, Visa, Mastercard and the banks that issue their cards were “enormously profitable” in 2021, the letter said, noting that the fees are set in a way that “insulates the rates from normal market pressures” and that the fees “already significantly exceed the actual cost” of processing transactions.

The letter noted that Visa, Mastercard and their banks charged merchants a total of $77.5 billion in credit card processing fees and $28.1 billion in debit card fees in 2021, according to the Nilson Report. Those numbers were part of $137.8 billion in processing fees when all types and brands of cards are included, a total that more than doubled over the previous decade.

The letter said Visa and Mastercard often announce decreases in some swipe fees only to raise others, resulting in a net increase, but that “merchants and American consumers are not fooled by such bait-and-switch tactics.” It said favorable rates that are contingent on using the networks’ proprietary security technology “may raise antitrust concerns” and “warrant close scrutiny.”

At an average of 2.22% of the transaction amount, Visa and Mastercard’s U.S. credit card swipe fees are the highest in the industrialized world. Swipe fees are most merchants’ highest operating cost after labor, and they drive up consumer prices, amounting to more than $700 a year for the average American family.

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