WASHINGTON–The Merchants Payments Coalition has renewed its call for Congress and the Federal Reserve to move quickly on legislation around credit and debit card swipe fees, saying new data show the fees “increased dramatically again” during 2022 and now cost the average family over $1,000 a year.
“Without competition, swipe fees continue to go nowhere but up,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said in a statement. “These fees are a multiplier for already high inflation and drive up costs for small businesses and prices for American consumers every day. Fees are going up nearly twice as fast as card volume, so this is not just a matter of increased card spending.”
According to the MPC, swipe fees have more than doubled over the past decade and rose 16.7% last year to an all-time record of $160.7 billion, according to the Nilson Report.
Numerous Claims Made
The organization further stated:
- Merchants paid $126.4 billion in processing fees for credit cards in 2022, an increase of 20%. “Fees for Visa and Mastercard credit cards, which dominate the market, were the vast majority of that amount and increased 21% to $93.2 billion.”
- Credit cards, which have an average swipe fee rate of over 2%, but can be as much as 4% when premium cards are used, account for 54% of payments but 79% of swipe fees.
- The increases came even though 2022 purchase volume was up only 12.3%, showing that fees – most of them from credit cards – are rising faster than card spending. Debit card swipe fees came to $34.4 billion, up 6% from 2021.
- Swipe fees are most merchants’ highest operating cost after labor and are too much to absorb, driving up prices paid by consumers. Based on the new data, credit and debit card swipe fees cost the average household an estimated $1,024 in higher prices in 2022, the first time the number has topped the $1,000 mark, the MPC said.
- High swipe fees have contributed to enormous profits for the card industry. Visa reported a net profit margin of 50% last year, while Mastercard saw 45% and the money center banks that issue the majority of credit cards averaged 27%. By contrast, the average net profit for general retail was only 2.4%, according to the MPC.
Legislation to Be Reintroduced
As CUToday.info has reported, the MPC is releasing its data at the same time Sens. Richard Durbin (D-IL) and Roger Marshall (R-KS) are preparing to reintroduce the Credit Card Competition Act, which was introduced in the last Congress but ultimately not passed.
The bill would require issuers with over $100 billion in assets to enable credit cards to be processed over at least two unaffiliated networks. One could still be Visa or Mastercard, but the other would be a competing network such as NYCE, Star or Shazam. The bill allows FIs to choose which two to enable, but merchants would choose which to use, “forcing networks to compete over fees, security and service,” the MPC said.
Credit unions remain adamantly opposed to the legislation.