Dive Brief:

• Reps. Peter Welch (D-VT) and Lance Gooden (R-Texas) introduced on Monday the Credit Card Competition Act, the House version of the Senate bill introduced in July. The aim is to increase competition in the credit card market and reduce swipe fees.
• If approved, the bill would require large U.S. banks that issue Visa or Mastercard credit cards to let transactions be processed over at least two unaffiliated card payment networks — the same process used for debit card transactions for more than a decade.
• Convenience-store swipe fees are a drag on the bottom line, totaling $14 billion in 2021 — a 26% increase from 2020 — and grew another 33% during the first half of 2022, according to the National Association of Convenience Stores (NACS).

Dive Insight:

For many c-store retailers, credit card swipe fees exceed their pre-tax profits and represent their second-highest operating costs after labor, according to NACS.

“That means swipe fees are more than the average retailer pays for rent or utilities or for any other operating cost. Some convenience retailers have even reported that the fees are approaching their labor costs,” NACS General Counsel Doug Kantor said in a May 2022 hearing before the U.S. Senate.

Kantor said retailers have paid more in swipe fees selling fuel to customers — often about 10 cents per gallon — than they were making on those sales. 

“[Swipe fees] makes no sense given the costs retailers incur and risks they take to maintain a site with underground storage tanks, transport fuel and sell it to customers — often staying open 24 hours per day during a labor shortage and, in the past two years, a pandemic,” he said.

The Credit Card Competition Act proposes an open marketplace for credit card processing where retailers choose their preferred payment network to use to handle a transaction. Since Visa and Mastercard issue 83% of all U.S. credit cards, other networks equipped to route said transactions have been blocked from entering the market, NACS has said.

Kantor argued in May the lack of competition leads to an inability for businesses to plan for expected costs. “Businesses just don’t know how much the fees will go up. Even after new rates are announced it is difficult to predict how those rates will impact a merchant’s fees because the card networks have made the system so complex,” he said.

This legislation, if approved, would save $11 billion annually for U.S. businesses and consumers, according to payments consulting firm CMSPI.

U.S. banks that issue Visa and Mastercard credit cards charge an average swipe fee of 2.25% of the purchase price when the cards are processed over Visa or Mastercard’s networks, equating to an estimated $900 a year per family, according to NACS.