Credit Card Competition Act will inject competition into the marketplace, benefit consumers

Across the nation, the skyrocketing cost of living for hardworking Americans is up $700 to $900 per month. The cost of groceries and gas has families nationwide tightening their budgets, but what if I told you there’s a hidden tax baked into each credit card purchase you make that’s causing the value of your dollar to decrease even more? 

Credit card swipe fees are an inflation multiplier and a hidden tax on Americans. As retail prices go up, the total passed on to the consumers goes up disproportionately. The price-gouging tactics from credit card swipe fees are simple. The credit card companies take a percentage of the total transaction cost that multiplies with every cent of inflation, and these fees apply to almost every product and service purchased: Gas, groceries, household items, and beyond are all taxed by the major credit card duopoly, Visa and Mastercard. Make no mistake; this powerful credit card duopoly knows exactly what it is doing to consumers who are already feeling the pain of high inflation. In fact, when asked about the impacts of inflation, Visa’s CEO bragged, saying inflation has been “positive” for them.

To put it simply, the credit card markets are broken. 

Americans pay 2.5 times more than Canada and 7 times more than the EU in swipe fees. Most retailers pay more in swipe fees than health insurance or utilities for their employees. Two companies control this $10 trillion-plus industry, with a combined net profit of more than $25 billion. 

In Kansas, we have a saying for this, “pigs get fat, and hogs get slaughtered.” Visa and Mastercard have gotten hoggish on the backs of hardworking Americans. Every time a consumer pays with their credit card, the merchant must pay hidden nonnegotiable processing fees known as swipe fees that vary between 2 percent and 4 percent of the transaction amount. Visa and Mastercard set the price of the swipe fees, and due to lack of competition, we all pay this clandestine fee. 

This blockbuster duopoly has enjoyed a more than 15 percent gain year-over-year on these profits from 2022 vs. 2021, while swipe fees paid by merchants went from $138 billion to $160 billion in this same timeframe. This nearly 17 percent price hike on merchants occurred while transactions were up only 12 percent, with the increase ultimately passed on to consumers. 

As Main Street businesses and Americans struggle with the price of gas and groceries that are still up by double digits, they are forced to pay the highest swipe fees in the world. Last year, $22 billion in fees were passed on to small businesses and consumers, undoubtedly exacerbating inflation to line the pockets of Wall Street. To put that in perspective, the money made from these swipe fee increases on small businesses last year alone was more than the entire annual revenue of the NFL. 

It is past time to inject competition in markets dominated by Visa and Mastercard. That is why we are reintroducing the Credit Card Competition Act, bipartisan and bicameral legislation that would rein in the big banks and the credit card industry, drive down the swipe fees for merchants like grocery and convenience stores, gas stations, and other small businesses, and ultimately pass those savings down to consumers. This legislation is the right thing to do, and I am proud to reintroduce it this Congress with even more bipartisan support in both the House and the Senate. 

The credit card industry, for too long, has pushed around small businesses and price-gouged Americans. Enough is enough. When it comes to Main Street vs. Wall Street, I’ll stand with Main Street businesses, which are the backbone of our economy, every single time. 

Competition is a good thing. This legislation will require competition, not price fixing, drive down consumer costs, improve cybersecurity, and keep our Kansas community banks safe as it only applies to banks valued at more than $100 billion. Competition is the answer to this problem. Our legislation will drive down fees, increase innovation and put consumers back in the driver’s seat. You cannot have capitalism without competition. 

Roger Marshall, M.D., is the junior senator from Kansas.