American families have long faced a significant financial burden due to “swipe” fees imposed by banks to process credit card transactions. According to the Merchant Payments Coalition (MPC), these fees will cost the average family between $20 and $30 annually. With swipe fees averaging 2.24% of transactions and occasionally reaching upwards of 4%, they represent a considerable operating cost for merchants, surpassed only by labor expenses.
The Credit Card Competition Act (CCCA) (H.R. 3881, S. 1838) has emerged as a potential solution to this problem. Spearheaded by a bipartisan group of lawmakers led by Senator Dick Durbin (D-Ill.), the CCCA seeks to introduce competition into the swipe fee market. Under the current system, the fees are set by card processors, such as Visa and Mastercard, with merchants having no say in the matter due to these networks’ dominance.
Critics argue that this lack of competition enables Visa and Mastercard to dictate swipe fees without competitive pressure. Compared to the UK’s 0.3%, the United States’ credit card interchange fees are notably higher at 1.8%. However, the MPC clarifies that the CCCA will not affect consumer card rewards as speculated.
The impact of these fees on families’ education expenses is considerable. For K-12 school supplies, clothing, and related items, annual spending is projected to reach a record $41.5 billion. Swipe fees alone account for nearly $20 per family and $929.6 million overall. Similarly, back-to-college expenses are expected to average $1,367 per family, totaling $94 billion, with swipe fees adding just over $30 on average and $2.1 billion overall. Together, these fees could exceed $3 billion for back-to-school and back-to-college expenses.
Over the past decade, swipe fees have more than doubled and contributed to a record $160.7 billion in 2022, including debit card transactions. As a result, the average family’s expenses have increased by over $1,000 annually.
The CCCA presents a critical opportunity for Congress to address this growing issue. By requiring banks with assets of at least $100 billion to enable their issued cards to be processed over at least two unaffiliated networks, the CCCA aims to foster competition, lower fees, and enhance security. If enacted, this legislation could potentially save merchants and customers up to $15 billion per year.
